bailey_187
1st March 2010, 23:33
The Kinked Demand curve, put forward by Paul Sweezy claims that in Monopolisitc/Oligopolistic economies, price competition is effectivly banned by Capitalists.
http://www.amosweb.com/images/MsOp41c.gif
if the firm in this diagram raises its price, Q (the amount sold) will move along the D curve to the left more than the price increase because other firms will undercut it, making the price increase not very profitable.
And if the price is lowered, the increase in price will be followed by all other firms as there are not many other firms in the oligopolisitc market, so all firms lower their price and hardly any extra goods will be sold. So firms keep their prices steady and the act of competition that was meant to keep profits down, ceases
My teacher claimed that there is no empircal evidence for this. Is there?
http://www.amosweb.com/images/MsOp41c.gif
if the firm in this diagram raises its price, Q (the amount sold) will move along the D curve to the left more than the price increase because other firms will undercut it, making the price increase not very profitable.
And if the price is lowered, the increase in price will be followed by all other firms as there are not many other firms in the oligopolisitc market, so all firms lower their price and hardly any extra goods will be sold. So firms keep their prices steady and the act of competition that was meant to keep profits down, ceases
My teacher claimed that there is no empircal evidence for this. Is there?