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A kink in an otherwise linear demand curve. Note how marginal costs can fluctuate between MC1 and MC3 without the equilibrium quantity or price changing. The Kinked-Demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices.
Sweezy did pioneering work in the fields of expectations and oligopoly in these years, introducing for the first time the concept of the kinked demand curve in the determination of oligopoly pricing. [3] Harvard published Sweezy's dissertation, Monopoly and Competition in the English Coal Trade, 1550–1850, in 1938.
The kinked demand curve for a joint profit-maximizing oligopoly industry can model the behaviors of oligopolists' pricing decisions other than that of the price leader. Above the kink, demand is relatively elastic because all other firms' prices remain unchanged.
The graph below depicts the kinked demand curve hypothesis which was proposed by Paul Sweezy who was an American economist. [29] It is important to note that this graph is a simplistic example of a kinked demand curve. Kinked Demand Curve. Oligopolistic firms are believed to operate within the confines of the kinked demand function.
A demand curve is a graph depicting the inverse demand function, [1] a relationship between the price of a certain commodity (the y-axis) ...
The last image we have of Patrick Cagey is of his first moments as a free man. He has just walked out of a 30-day drug treatment center in Georgetown, Kentucky, dressed in gym clothes and carrying a Nike duffel bag.
For young families, housing continues to be a major expense, with demand outstripping supply. The median home sale price was $434,720 in October, up 5% compared to the same time last year ...
In order to distinguish themselves well, these firms can compete in price, but more often, oligopolistic firms engage in non-price competition because of their kinked demand curve. In the kinked demand curve model, the firm will maximize its profits at Q,P where the marginal revenue (MR) is equal to the marginal cost (MC) of the firm.