Answer to Question #67741 in Economics of Enterprise for Ashley
Explain the implications and short comings of the kinked demand curve in an oligopolistic marke
There are two major disadvantages in the kinked-demand-curve explanation. Firstly, it denies output fluctuations in response to changes in cost, a stability unsupported by evidence. Secondly, the theory don't explain for how the current price (at which the demand curve is kinked) is arrived at.