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    Oligopoly: Underlying assumptions of the kinked-demand curve

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    What assumptions about a rival's response to price changes underlie the kinked-demand curve for oligopolists? Why is there a gap in the oligopolist's marginal-revenue curve? How does the kinked-demand curve explain price rigidity in oligopoly? What are the shortcomings of the kinked-demand model?

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    https://brainmass.com/economics/oligopoly/oligopoly-underlying-assumptions-kinked-demand-curve-98697

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    The basic assumption in the kinked demand curve theory is that if a single firm lowers its price, the other firms in the industry will move to match it, but if ...

    Solution Summary

    Underlying assumptions of the kinked-demand curve for oligpolists and the shortcomings of this model.

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