The kinked demand curve describes price rigidity

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1. The kinked demand curve describes price rigidity. Explain how the model works. What are its limitations? Why does price rigidity occur in oligopolistic markets?

2. Why does price leadership sometimes evolve in oligopolistic markets? Explain how the price leader determines a profit-maximizing price.

3. Why has the OPEC oil cartel succeeded in raising prices substantially while the CIPEC copper cartel has not? What conditions are necessary for successful cartelization? What organizational problems must a cartel overcome?

Reference no: EM13321696

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