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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

Abstract: 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)
Date: 2012
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DOI: 10.1016/j.econlet.2011.12.117

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