7/25/2019 Economics 2nd

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KINKED DEMAND CURVE

& IT’S APPLICATIONS

ABSTRACT

The Kinked Demand Curve Theory of Oligopoly: It has been observed that an!

o"#$o%o"#st# #nd'str#es e(h#b#t an a%%re #ab"e de$ree o) %r# e r#$#d#t! or stab#"#t!* In other

+ords, #n an! o"#$o%o"#st# #nd'str#es %r# es re a#n st# -! or #n)"e(#b"e, that #s, there #s no

tenden ! on the %art o) the o"#$o%o"#sts to han$e the %r# e even #) the e ono # ond#t#ons

'nder$o a han$e* Man! e(%"anat#ons have been $#ven o) th#s %r# e r#$#d#t! 'nder o"#$o%o"!

and ost %o%'"ar e(%"anat#on #s the so. a""ed -#n-ed de and 'rve h!%othes#s* The -#n-ed

de and 'rve h!%othes#s +as %'t )or+ard #nde%endent"! b! Pa'" M* S+ee/!, an A er# an

e ono #st, and b! 0a"" and 0#t h, O()ord e ono #sts* It #s )or e(%"a#n#n$ %r# e and o't%'t

'nder o"#$o%o"! +#th %rod' t d#))erent#at#on, that e ono #sts o)ten 'se the -#n-ed de and

'rve h!%othes#s* Th#s #s be a'se +hen 'nder o"#$o%o"! %rod' ts are d#))erent#ated, #t #s

'n"#-e"! that +hen a )#r ra#ses #ts %r# e, a"" 'sto ers +o'"d "eave #t be a'se so e

'sto ers are #nt# ate"! atta hed to #t d'e to %rod' t d#))erent#at#on* As a res'"t, de and

'rve )a #n$ a )#r 'nder d#))erent#ated o"#$o%o"! #s not %er)e t"! e"ast# * On the other hand,

'nder o"#$o%o"! +#tho't %rod' t d#))erent#at#on, +hen a )#r ra#ses #ts %r# e, a"" #ts 'sto ers

+o'"d "eave #t so that de and 'rve )a #n$ an o"#$o%o"#st %rod' #n$ ho o$eneo's %rod' t

a! be %er)e t"! e"ast# * 1'rther, 'nder o"#$o%o"! +#tho't %rod' t d#))erent#at#on, there #s a

$reater tenden ! on the %art o) the )#r s to 2o#n to$ether and )or a o""'s#on, )or a" or ta #t,

and, a"ternat#ve"!, to a e%t one o) the as the#r "eader #n sett#n$ the#r %r# e* No do'bt, -#n-ed

de and 'rve has a s%e #a" re"evan e )or d#))erent#ated o"#$o%o"!, b't #t has a"so been a%%"#ed

)or e(%"a#n#n$ %r# e and o't%'t 'nder o"#$o%o"! +#tho't %rod' t d#))erent#at#on* The de and

'rve )a #n$ an o"#$o%o"#st, a ord#n$ to the -#n-ed de and 'rve h!%othes#s, has a 3-#n-’ at

the "eve" o) the %reva#"#n$ %r# e* The -#n- #s )or ed at the %reva#"#n$ %r# e "eve" be a'se the

se$ ent o) the de and 'rve above the %reva#"#n$ %r# e "eve" #s h#$h"! e"ast# and the

se$ ent o) the de and 'rve be"o+ the %reva#"#n$ %r# e "eve" #s #ne"ast# *

7/25/2019 Economics 2nd

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SYNOPSIS

RESEARC0 MET0ODOLO45

1or th#s %ro2e t t#t"ed, 3KINKED DEMAND CURVE & #ts APPLICATIONS’ the

Co %arat#ve do tr#na" ethod* Pr# ar! reso'r es re)erred to #n the o'rse o) resear h

#n "'de boo-s, 2o'rna"s, "a+ re%orts and ases, ost o) the a essed )ro the DSNLU "a+

"#brar!* Other so'r es "#-e art# "es, and the "#-e +ere a essed on"#ne thro'$h the 'se o)

on"#ne databases* A"" d#re t 6'otat#ons have been %ro%er"! )ootnoted*

AIM AND OB7ECTIVES

The a# o) the %ro2e t #s to tra e the 3K#n-ed de and 'rve & #ts a%%"# at#ons’ and ana"!se

the deve"o% ents that "ed to #ts ena t ent #n Theor! o) O"#$o%o"! the %ro2e t a"so vent'res to

see- the %os#t#on and e))e t o) ar-ets #n $enera" and %resent a br#e) v#e+ on the han$#n$

not#ons*

SCOPE AND LIMITATIONS

The %ro2e t overs the deve"o% ent o) the 3 K#n-ed De and 'rve’ r#$ht )ro the ear"! sta$es

o) the ar-et %os#t#on that event'a""! "ed to the )or at#on o) the Theor! o) O"#$o%o"!

The resear h #s "# #ted to the reso'r es ava#"ab"e at the DSNLU L#brar!* Boo-s re"ated to the

to%# are ava#"ab"e at the "#brar!* A"so, the so'r es ava#"ab"e on the #nternet he"%ed a

ons#derab"e dea"* S'$$est#ons )ro the o'rse.#nstr' tor and )e""o+ st'dents have been

#n or%orated +herever ne essar!*