Can prices be insensitive to unit cost variations? A game-theoretic alternative to the kinked demand curve explanation
Giorgos Stamatopoulos () and
Minas Vlassis ()
Economics Letters, 2012, vol. 116, issue 1, 89-91
We provide a game-theoretic alternative of the kinked demand curve explanation of rigid prices. We analyze a duopoly where firms choose quantities and objectives. We identify cases under which firms choose to maximize their revenue. Under these cases, prices are insensitive to unit costs.
Keywords: Kinked demand curve; Revenue maximization; Profit maximization (search for similar items in EconPapers)
JEL-codes: D43 L13 L21 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:116:y:2012:i:1:p:89-91
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