Decision Making under Conditions of Turbulence and Uncertainty: The Case of the Kinked Demand Curve

John Gowdy and Atilla Yesilada
Authors registered in the RePEc Author Service: John Gowdy () and John Malcolm Gowdy

Eastern Economic Journal, 1988, vol. 14, issue 4, pages 399-408

Abstract: This paper is an attempt to place oligopoly price stickiness into a pure uncertainty framework. Using the concept of the "reliability ratio," developed by Robert Heiner, the authors are able to show that price stickiness is a rational response to the demand uncertainty generated by oligopolistic market structures. Their model is capable of explaining how equilibrium prices change when the structure of the industry changes. The authors present an empirical model and tests of their hypothesis.

Date: 1988

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