which market features the kinky demand curve 9
公開日:2022/04/04 / 最終更新日:2022/04/04
Kinked Demand Curve
The demand for products that are sold by oligopoly firms are high and in general, these goods are needed or wanted by the large majority of the population. The price leader of the industry is usually the firm that has dominance over the market or having the lowest cost of production in the industry. In order to avoid regular competition in the market, all firms keep their prices fixed, which results to price rigidity. Non-collusive oligopoly refers to the market where firms behave independently but in reality, they are interdependent in the industry. Seller’s perception of the other sellers in the market decides their behaviour and decisions. Intersection of the MC with the MR segments requires abnormally high or abnormally low costs, which are rather rare in practice.
In addition, the journal serves members of SEA and other readers interested in economics through the publication of book reviews, and announcements. The Southern Economic Journal has been published quarterly by the Southern Economic Association since its inception in 1933, and currently contains approximately 1,000 printed pages per year. Stackelberg model is a sequential move game model in which one firm sets its output before the other firms do . Introduced in 1934 , this model has two firms deciding the quantity to be produced sequentially selling the homogeneous products . The market share of firm A and B are the same which means the demand is also the same for both of these firms.
Finally, even in the case of pure oligopoly (i.e. oligopoly with homogenous products), the kinked demand curve theory does not furnish a complete explanation for price rigidity observed in oligopolistic markets. From the kinked demand curve analysis it follows that prices are likely to remain stable when demand or cost conditions decrease, whereas under pure oligopoly prices are likely to rise in the case of increase in cost or demand. Likewise, the kinked demand curve theory explains that even when the demand conditions change, the price may remain stable. 29.6 in which when the demand for the oligopolist increases from dKD to d’K’D’, the given marginal cost curve MC also cuts the new marginal revenue curve MR’ within the gap.
As a result, news the upper segment of the demand curve becomes more elastic, that is, it becomes more nearly horizontal. Rather than getting pulled into a price war, some firms may not respond to price cut but concentrate on non-price competition to retain an advantage. If a firm cut its price, it is likely to lead to a different effect.
One possibility is the market for petrol, which is homogenous and consumers are price sensitive. Presents a non-cooperative equilibrium concept, applicable to supergames, which fits John Nash’s non-cooperative equilibrium and also has some features resembling the Nash cooperative solution. In the above graph, firm A MC is MCa and MCb is the MC curve of firm B. The dotted line represents the discontinuity of the MR curve. These industries produce products that are close to each other but each product has different characteristics.
「Uncategorized」カテゴリーの関連記事