Fani Warraich ECONOMICS   -   Managerial Economics

Why is the kinked demand curve model used in oligopoly markets?

The kinked demand curve model is used to explain why prices in oligopoly markets tend to be rigid. The model suggests that firms are reluctant to change prices because they expect competitors to match price decreases but not price increases, leading to a kink in the demand curve and resulting in price stability.
What is the primary characteristic of a Nash Equilibrium in game theory? When should a firm continue producing in the short run even if it is incurring losses? Which pricing strategy involves setting a high initial price for a new or innovative product to "skim" segments of the market willing to pay the higher price? When analyzing a firm's cost structure, what does the term "economies of scope" refer to? How to determine the optimal capital structure for a firm according to the Modigliani-Miller theorem without taxes? What is the main reason for a firm to engage in price discrimination? Where is the optimal point of production for a firm operating under perfect competition in the long run? Why is the kinked demand curve model used in oligopoly markets? Which factor can lead to economies of scale in production? How to determine the profit-maximizing output level for a monopolist?