The Kinked Demand Model and the Stability of Cooperation
Marco A. Marini
Sapienza Università di Roma ; CREI, University Rome III
University of Leicester - Department of Economics; Ca Foscari University of Venice - Department of Economics; Centro Euro-Mediterraneo per i Cambiamenti Climatici (CMCC); Fondazione Eni Enrico Mattei (FEEM), Milan
July 1, 2009
WP-EMS # 2009/05
This paper revisits a particular behaviour for firms competing in imperfect competitive markets, underlying the well known model of kinked demand curve. We show that under some symmetry and regularity conditions, this asymmetric behaviour of firms sustains monopoly pricing, and possesses therefore some "rationality" interpretation. We also show that such a behaviour can be generalized and interpreted as a norm of behaviour that sustains efficient outcomes in a more general class of symmetric games.
Number of Pages in PDF File: 12
Keywords: kinked demand, symmetric games, norms of behaviour
JEL Classification: C70, D21, D43, L13working papers series
Date posted: September 24, 2009
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