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- The kinked demand curve of oligopoly was developed by Paul M. Sweezy in 1939. Instead of laying emphasis on price-output determination, the model explains the behavior of oligopolistic organizations. The model advocates that the behavior of oligopolistic organizations remain stable when the price and output are determined.
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Paul Sweezy of Harvard College published "Demand Under Conditions of Oligopoly." Sweezy argued that an ordinary demand curve does not apply to oligopoly markets and promotes a kinked demand curve.
Sweezy’s Kinked Demand Curve Model: The kinked demand curve of oligopoly was developed by Paul M. Sweezy in 1939. Instead of laying emphasis on price-output determination, the model explains the behavior of oligopolistic organizations.
The kinked demand curve (Sweezy, 1939; Hall and Hitch, 1939) has been one of the staples of oligopoly theory. It was originally formulated as a theory of price rigidity. A rm conjectures that its rivals will match its price if it reduces the price, but will not match its price if it initiates a price increase.
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A kinked demand curve occurs when the demand curve is not a straight line but has a different elasticity for higher and lower prices. One example of a kinked demand curve is the model for an oligopoly.
Mar 6, 2019 · The kinked-demand curve model (also called Sweezy model) posits that price rigidity exists in an oligopoly because an oligopolistic firm faces a kinked demand curve, a demand curve in which the segment above the market price is relatively more elastic than the segment below it.
Jan 1, 2017 · The kinked demand curve (Sweezy, 1939; Hall and Hitch, 1939) has been one of the staples of oligopoly theory. It was originally formulated as a theory of price rigidity. A firm conjectures that its rivals will match its price if it reduces the price, but will not...
Oct 1, 2004 · The second introduced the famous “kinked demand curve” theory of oligopolistic pricing, which explained why oligopolistic prices tend to go only one way—up. Both of these themes were to play a large role in the later theory of monopoly capital, as developed by Sweezy and Paul Baran.
