Question

Lukas owns a phone company in a city with three other phone companies. he wants to attract more customers and is considering lowering his prices to do so. according to the kinked demand curve theory, will this strategy work? fill in the blanks to complete the passage.

Answer 1

seemingly an oligopolistic market,other companies will react by lowering their prices to the level that prices stucks. according to the kinked demand curve theory, this strategy does not produce much fruits, as it only lowers profit, in oligopolistic competition.The theory was developed to explain stuck prices.