The Kinked Demand Model and the Stability of Cooperation
AbstractThis paper revisits a particular behaviour for firms competing in imperfect competitive markets, underlying the well known model of kinked demand curve. We show that under some symmetry and regularity conditions, this asymmetric behaviour of firms sustains monopoly pricing, and possesses therefore some "rationality" interpretation. We also show that such a behaviour can be generalized and interpreted as a norm of behaviour that sustains efficient outcomes in a more general class of symmetric games.
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Bibliographic InfoPaper provided by University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini in its series Working Papers with number 0905.
Length: 12 pages
Date of creation: 2009
Date of revision: 2009
Kinked Demand; Symmetric Games; Norms of Behaviour.;
Find related papers by JEL classification:
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-19 (All new papers)
- NEP-COM-2009-09-19 (Industrial Competition)
- NEP-GTH-2009-09-19 (Game Theory)
- NEP-IND-2009-09-19 (Industrial Organization)
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