Can prices be insensitive to unit cost variations? A game-theoretic alternative to the kinked demand curve explanation
AbstractWe provide a game-theoretic alternative of the kinked demand curve explanation of rigid prices. We analyze a duopoly where firms choose quantities and objectives. We identify cases under which firms choose to maximize their revenue. Under these cases, prices are insensitive to unit costs.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 116 (2012)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/ecolet
Kinked demand curve; Revenue maximization; Profit maximization;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, Econometric Society, vol. 56(3), pages 571-99, May.
- Julio Rotemberg & Garth Saloner, 1986.
"The Relative Rigidity of Monopoly Pricing,"
414, Massachusetts Institute of Technology (MIT), Department of Economics.
- Rotemberg, Julio J & Saloner, Garth, 1987. "The Relative Rigidity of Monopoly Pricing," American Economic Review, American Economic Association, American Economic Association, vol. 77(5), pages 917-26, December.
- Sen, Debapriya, 2004. "The kinked demand curve revisited," Economics Letters, Elsevier, Elsevier, vol. 84(1), pages 99-105, July.
- Bhaskar, V., 1988. "The kinked demand curve: A game-theoretic approach," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 6(3), pages 373-384.
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