question archive The oligopoly model that predicts that oligopoly prices will tend to be very rigid is the model
The oligopoly model that predicts that oligopoly prices will tend to be very rigid is the model
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The oligopoly model that predicts that oligopoly prices will tend to be very rigid is the model.
a) Cournot
b) Stackelberg
c) Dominant firm
d) Kinked demand
e) Nash
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The correct option is d) Kinked demand.
Kinked demand oligopoly graph is a demand curve but not a straight line since the quantity demanded reacts differently with a price increase or price decrease.
This is the case if the firm raises price it will lose some share in the market while a price decrease causes other firms to follow as well and therefore price war exists.
