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The Kinked Demand Model and the Stability of Cooperation

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Author Info
Sergio Currarini () (Department of Economics,Faculty of Economics, Università degli Studi di Venezia "Ca' Foscari")
Marco Marini () (Dipartimento di Economia e Metodi Quantitativi, Università di Urbino (Italy))

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Abstract

This 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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File URL: http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_09_05.pdf
File Format: application/pdf
File Function: First version, 2009
Download Restriction: no

Publisher Info
Paper provided by University of Urbino Carlo Bo, Department of Economics in its series Working Papers with number 0905.

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Length: 12 pages
Date of creation: 2009
Date of revision: 2009
Handle: RePEc:urb:wpaper:09_05

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Web page: http://www.econ.uniurb.it/
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Related research
Keywords: 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
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

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This page was last updated on 2009-11-17.

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