The Kinked Demand Model of Oligopoly

[@arifshaikh3792]

00:05 The kinked demand model of oligopoly explains the difference between relatively inelastic and elastic demand curves. 01:29 Kinked demand model explains non-price competition in oligopoly. 02:54 Oligopoly firms face a kinked demand curve 04:22 Kinked demand model shows elastic and inelastic demand reactions to price changes. 05:42 The kinked demand model leads to a discontinuous marginal revenue curve at Q star. 07:04 Firm's incentive to lower prices above P star and increase prices below P star 08:22 Marginal cost affects price and output, but real-life prices can be sticky. 09:50 The talk focuses on the unique demand concept in oligopoly. Crafted by Merlin AI.

[@SchafleitnerWohnungen]

perfect explanation - thank you very much!! greets from austria

[@cynthiad5897]

10/10 video

[@tanmaychopra4239]

Thanks very much for fulfilling the request!

[@econhelp_official]

No problem! Hope it helped!

[@farahahmed01]

hey, Thank you very much for the video. Your explanations are great. One question if you could please answer: so basically this model is simply telling that the oligopolist will neither increase or decrease prices? and even if MC changes due to changes in variable costs, despite that the prices and quantity will not change? and also isn't this model showing profit maximisation quantity using the mc=mr rule but with constant prices and quantity because it is in the best interest of the oligopoly firm to not change prices and resulting quantities?

[@econhelp_official]

Hi! I'm so sorry, I had a reply written to this on my phone ages ago, and I think I didn't press 'reply' properly, so the reply didn't get put up, and this is really late but absolutely, your interpretation is 100% how I would understand the model and it's various outcomes. I agree with everything you say here.

[@farahahmed01]

thank you so much, your videos help us pass our courses @@econhelp_official

[@cobbdude]

how do you know that the marginal cost curves will be in such a position that the profit maximising output is always q*?

[@econhelp_official]

I take it that the model is trying to give an explanation of why, for some goods, the cost of production can change but the P*, q* profit max decision doesn't seem to change as other models will suggest (this is the sticky price phenomenon). So q* is the given that needs to be explained. This model gives us one possible reason why over a range of different MC's we would get q*. Maybe then the right way to think about it is that we assume that MC's are in this region if we observe this sort of phenomenon, and if we think that this is a good model to explain the stickiness of the prices. Does that help?

[@iftikharhabib5548]

Hi. I am from Pakistan and I love your videos and style of explanation. Please be kind to share your email here so I can write to you for some querries. Would be very kind of you.

[@econhelp_official]

Thank you so much! [e-mail] :)