Rigidity of Prices in the Light of a Kinked Demand Curve
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Analyses of the properties of and the conditions under which the kinked demand curve emerges lead to the formulation of several important conclusions and hypotheses. The article dwells, among other issues, on the breadth of function's discontinuity, shifts of the demand curve, price rigidity as well as on the impacts exerted by the cost and demand shocks. The demonstrated complexity of the kinked demand curve concept, together with the arrived at conclusions, allow the author to regard this concept as the most general mode of explaining the oligopoly operation in modern times. In particular, this model helps to understand price rigidity.
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