Microeconomic Theory, Price Policy in Oligopoly.
"Price Policy in Oligopoly"
Instr.: Dr. Michael Chletsos
Price-output behavior in Oligopoly
The kinked demand curve: This model was developed in 1939 by the economist Sweezy. It assumes that an oligopolist will expect rival firms to follow any price decrease it makes but not follow any increase. Thus the elasticity of demand for the firm's product is much greater above the ruling price than below it, and hence there is a kink in the demand curve faced by the firm.
For straight line demand curves the marginal revenue line lies h…
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