Can prices be insensitive to unit cost variations? A game-theoretic alternative to the kinked demand curve explanation
We 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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- Sen, Debapriya, 2004. "The kinked demand curve revisited," Economics Letters, Elsevier, vol. 84(1), pages 99-105, July.
- Julio Rotemberg & Garth Saloner, 1986.
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- Bhaskar, V., 1988. "The kinked demand curve: A game-theoretic approach," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 373-384.
- Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-99, May.
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