The Kinked Demand Model and the Stability of Cooperation

Sergio Currarini () and Marco Marini

No 905, Working Papers from University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini

Abstract: This paper revisits a particular behaviour for firms competing in imperfect competitive markets, underlying the well known model of kinked demand curve. We show that under some symmetry and regularity conditions, this asymmetric behaviour of firms sustains monopoly pricing, and possesses therefore some "rationality" interpretation. We also show that such a behaviour can be generalized and interpreted as a norm of behaviour that sustains efficient outcomes in a more general class of symmetric games.

Keywords: Kinked Demand; Symmetric Games; Norms of Behaviour. (search for similar items in EconPapers)
JEL-codes: C70 D21 D43 L13 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2009, Revised 2009
New Economics Papers: this item is included in nep-com, nep-gth and nep-ind
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http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_09_05.pdf First version, 2009 (application/pdf)

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