Forgotten Part of the Oligopoly - Demand Curve in Pricing Leadership and Prize Discrimination Conditions
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In the model of oligopoly the demand curve kinks. The broken line depicting the demand curve may have two shapes: with the cusp directed upwards or downwards. Although the first one is generally considered as typical it is worth mentioning that P. Sweezy - one of the authors of the kink theory - thought of both of them as being equivalent. As far as we know no one has examined in detail the second case of the kink. The aim of the article is to investigate the characteristics of downwards kinked demand curve. We conclude that the point of the kink can not be the equilibrium position for the producer. Just opposite, keeping the price and the output in this point would be for him the worst solution. In this case the stability (stickiness) of price does not exists but it is not possible to stipulate the producer's decisions as to the price and output unless we know the set of non-pecuniary elements affecting his decision making process. Those factors are included in the managerial and institutional analysis.
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