Price-fixing along the elastic part of the demand curve and predatory pricing on the inelastic portion. How an oligopoly can achieve monopoly profits. The demand curve will be kinked if rival oligopolists match price reductions but not price increases.
Nov 30, 2011 · D) A high concentration ratio suggests that the industry is characterized by strategic dependence. 10. The kinked demand curve can explain why A) profits are not as high under oligopoly as one would expect. B) firms fail to cooperate in most oligopolistic situations. C) oligopolists usually engage in tit-for-tat strategies.
Generally, a perfectly competitive market exists when every participant is a "price taker", and no participant influences the price of the product it buys or sells.
Consumer theory is a theory of microeconomics that relates preferences to consumer demand curves. The link between personal preferences, consumption, and the demand curve is one of the most complex relations in economics. Implicitly, economists assume that anything purchased will be consumed, unless the purchase is for a productive activity.
contestability and the kinked demand curve, that are implicitly dynamic but have usually been discussed in static models. The main ingredient of our study is the idea of reactions based on short-run commitments. When we say that firm 1 is committed to a particular action in the short-
A. The kinked-demand model assumes a noncollusive oligopoly. (See Key Graph 23.4) 1. The individual firms believe that rivals will match any price cuts. Therefore, each firm views its demand as inelastic for price cuts, which means they will not want to lower prices since total revenue falls when demand is inelastic and prices are lowered. 2.
The kink is associated with a discontinuity in the marginal revenue curve below the kink. The marginal revenue curve is vertical directly under the kink so that there may be a range in which marginal costs may vary without having an effect on price or output. Considering the importance given to the kinked demand curve in microeconomic texts, and
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Question7 0.1 pts A kinked demand curve O is used to show why oligopolists frequently change prices. explains how certain prices arise in an oligopoly market O shows that firms in oligopolistic markets are not interdependent. O illustrates why oligopolists may be reluctant to change their pricing strategy.