Behaviour Of Firms Under Oligopoly:

There is no unique relationship between price and output of firms in an oligopolistic industry. The demand curve for the product of an oligopolistic firm is therefore derived from assumptions regarding the actions and reactions of competitors in terms of a price review, or a new advertising campaign, or development of a new product, and so on.

The oligopolist also faces a downward sloping demand curve whose nature is dependent on competitor's reaction to a price change, especially where products are similar. For instance, the tendency for the oligopolist to be driven by self-interest towards stable prices is discussed in the context of the kinked demand curve theory.