“Pharmaceutical companies that offer patented drugs with distinctive medical benefi ts have more power over hospitals, health maintenance organizations, and other drug buyers, for example, than drug companies offering me-too or generic products” (Porter, 2008, p. 83). Using Porter’s (2008) discussion of pharmaceutical companies in the article entitled “The five competitive forces that shape strategy”, as context, comment on the following questions.

What assumptions about a rival’s response to price changes underlie the kinked-demand curve for oligopolists?
Why is there a gap in the oligopolist’s marginal-revenue curve?
How does the kinked-demand curve explain price rigidity in oligopoly?
What are the shortcomings of the kinked-demand model?