Question: What assumptions about a rivals response to price changes underlie the kinked-demand curve for oligopolists? Why is there a gap in the oligopolists marginal-revenue curve?

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?

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