oligopoly-Kinked demand curve

oligopoly is a market structure dominated by a few firms.

Kinkes demand curve is a demand curve made up of two parts; it's suggest oligopolists follow each reductions, but not price rises.

kinkes demand curve can be used to explain why prices in oligopolistic markets are often rigid, or stable for relatively long periods of time. Price Rigidity is a condition where one follows a decrease in price but not an increase in price. This is due to the ability of other firms to match prices with it and it often leads to a kinked demand curve.

Attempt to stay at the same price which is point P shows the fixed price, and the output shows by the point Q. It is assume that a firm increase the price which is above point P , the other firms will not follow to increase the price because the oligopolistic market is non price competition. Therefore, when a firm increase the price the other firms will be able to sell more themselves, attracting customers from the firm that increased the price. Thus cause of this we know the demand is elastic to an increase in price. and it shows the firm's demand curve is AB and its marginal revenue is AC. Inversely, if the firm decrease the price, the other firm will follow, because if they do not cut the price, they will lose their market share for example, lose their customers. This is starts a price war, the result of which is likely to be that all firms lose out. The demand curve below B is inelastic, because it make a sense if the MC curve move up or down and the output will not change. While the marginal revenue curve is EF.