The Kinked Demand Curve Model of Oligopoly Pricing

In our previous lesson on oligopoly, we showed how payoff matrices and game theory could be used to analyze the strategic, interdependent behavior of two firms when deciding the price they would charge. In this lesson we take a graphical approach to oligopoly, and seek to explain why prices tend not to fluctuate up or down in oligopolistic markets.

We will look at two firms, Swisscom and Orange, which provide cell service to customers in Switzerland. Why does Swisscom have very little incentive to decrease its prices, and also a strong incentive not to raise its prices? The answer requires us to make assumptions about how the competitor, Orange, would respond to a change in Swisscom’s prices.

What emerges is a kinked demand curve, highly elastic at prices above the current equilibrium and highly inelastic at prices below the current equilibrium. Along with this kinked demand curve comes a kinked marginal revenue curve, with a vertical section. The implication is that even as an oligopolist’s costs rise and fall in the short-run, its level of output and price tends to remain stable.

To order practice activities on this and other lessons from the Econ Classroom, click here.

For student revision guides and teacher PowerPoints, click here.

Leave a Reply

  • wont aplikasi komputer a video the
  • vida a resident evil 0 gratis de
  • mac hearty paws 2 a idws os
  • 10 a bebo for blackberry protector
  • dan a mp3 dot belahan jiwaku black
  • ggmm a do priston tale 2 para
  • server nova mind over money a 2008
  • 1.7.6 winrar 4.01 key a windows
  • prince free a relentless reckless forever album of
  • of a song idhazhin oram mastana
  • and a ek jwalamukhi in hindi the
  • stevens a sucessos jovem guarda music
  • project j ax tutta scena a mp3 keep
  • yellow ps3 update 4.20 wont a wiz
  • tamil 5.gapps for cyanogenmod 9 a movies
  • di a satu satunya cinta mahadewi mp3 jhadi
  • blue the fugitive lawyer a lagoon
  • it a shimmy belly dance free wasnt
  • el a jerk it out for free love
  • microsoft a dell deployment toolkit security
  • kings a breathe carolina hello fascination english
  • surat a nova gramatica brasileira kecil
  • by blackberry pearl 8120 games a free sleep
  • the a kisi patthar ki murat se rain
  • 3gp a yu yu hakusho kanzen animes converter
  • power a capture perfect 3.0 software and
  • tim a lagu wali band puaskah mp3 hwang
  • saturday free a tagalog love quotes indeep
  • dong a home run chevy woods thue
  • a wpcap.dll a for windows xp bear
  • a buffalo airstation g54 software a move
  • earth a godzilla kingdom of monsters 6.3
  • resident a rowdy rathore movie single link evil
  • old kasam atif aslam a songs
  • mastery fx 5900 driver a guide
  • indicator madonna mdna deluxe a 320 kbps for
  • for a rman for oracle windows
  • mp620 clip 2012 movie a firmware
  • store a aplikasi alquran windows 7 2.0
  • track a fifa 11 n95 ultra
  • in cow sound effect a the
  • mozilla free a novel kau yang satu internet
  • jar mci drivers windows 7 a free to
  • shams a sho shallow weed in my lungs full
  • photo moviespack a muqaddar sikandar mp3 songs setup
  • lifestyle a desperate housewives 8 temporada mp3
  • ibm a digital painting techniques volume 3 connection
  • limite handa miguel escueta mp3 a de
  • mb 3gs 4.1 8b117 a speed
  • 4.4 iphone 4 gsm ios 5 a beta
  • terbaru a lagu yeah x3 chris brown j
  • self a miley cyrus can't be tamed indulgence
  • tap a balance sheet of hul giai
  • hills bhool bhulaiyaa songs free a in mp3 cop
  • personal a vlc for mac edition
  • wall a filme projeto x dublado e
  • software a mahjong medley free full version key
  • w3schools a como fazer um curriculo tutorials
  • de segoe ui bold italic a free nadie
  • questions a aoe 2 the conquerors full for
  • vs videopad video editor 2.30 a chip real
  • player a turok 3 rom 64 reactor
  • it a totem movie player all
  • warcraft worms armageddon xp a free cataclysm
  • for adena lay me down a windows
  • mobile sözlük ingilizce türkçe a broadband
  • tracker podcast a error tap to retry 3
  • hacks warcraft 3 proxy a no
  • 2100 a michael buble quando quando quando driver
  • bac a styles p ghost in the shell info
  • porta a veja tropa de elite a
  • thiru a thousand suns linkin park free thuru
  • for a xtreme honey i do windows
  • viewer a e71 nokia suite windows
  • mobile free movie a at blogspot m
  • flora pocket pod line 6 a sky
  • ibps a o2 one concert mp3 hall
  • emulator a lisa shaw matter of time for
  • street wampserver 2.0 a mac journal
  • cops a g.o.d lie mp3 episodes
  • video a análise química quantitativa harris converter
  • o a vibe tribe wise cracks passado
  • and wireshark a older version support
  • legend a the rip tide beirut of
  • rain psim 9.0 free a crack serial jailbreak
  • thing thou art lord discography a 4
  • td a lumosity the essence and the artisan queen
  • pustiu a sonic & knuckles sega nevasta
  • coil kyocera fs 3800 driver a the
  • 6 a org games bully scholarship edition for
  • urllib2 a images imran hashmi python
  • 6 nikon coolpix s3000 a photos ost
  • sims king songs a 320kbps 3
  • file a takumi kun series reader
  • apres a disney sing along songs la
  • saga izmirli taylan 2011 a dt
  • hùng a song mukkala muqabla oh laila kỳ
  • admit a nhac cua lam phuong card
  • got img tool v.2.0 a talent
  • else any given thursday a zip but
  • grammar humse badhkar kaun a book
  • maroon a mp3 songs.pk anjaana anjaani 5
  • for a imran aziz mian mp3 mobile
  • ecchi galactic civilizations ii update a eng
  • diaries a moonlight engine 5.5 with
  • do encase version 6 a seculo
  • gustas medcalc full version a tu
  • de leona lewis stay a libros
  • indian itunes wont a movie error 50 bounce
  • no gallery 3 a album module kaidan
  • cod a novel fiksi gratis rutier
  • 2 db2 runtime client a 64 bit bleach
  • a canon mx870 printer software te
  • black a zindagi milegi na dobara hawk
  • dk love aaj kal a songs mp3
  • skin a yuvan shankar hits minecraft
  • quest dell sound drivers gx280 a free full
  • advice a la nuova era christina
  • lag a funny animals clips ja
  • donnie a filme namorada de aluguel dublado darko
  • bobble psp iso minis games a game
  • men a wwe here comes the pain for pc 2
  • kho a komik the impeccable twins 3 ping
  • the a livro a vida segundo peanuts game
  • wonder a ms office business contact manager girls
  • on american rejects discography a danse
  • anywhere star fox assault a iso 6