The Kinked Demand Model and the Stability of Cooperation

WP-EMS # 2009/05

12 Pages Posted: 24 Sep 2009

See all articles by Marco A. Marini

Marco A. Marini

Marco A. Marini; University of Rome La Sapienza

Sergio Currarini

University of Leicester - Department of Economics

Date Written: July 1, 2009

Abstract

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.

Keywords: kinked demand, symmetric games, norms of behaviour

JEL Classification: C70, D21, D43, L13

Suggested Citation

Marini, Marco A. and Currarini, Sergio, The Kinked Demand Model and the Stability of Cooperation (July 1, 2009). WP-EMS # 2009/05, Available at SSRN: https://ssrn.com/abstract=1157412 or http://dx.doi.org/10.2139/ssrn.1157412

Marco A. Marini (Contact Author)

Marco A. Marini ( email )

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Roma, 00185
Italy

HOME PAGE: http://sites.google.com/a/uniroma1.it/marcomarini/

University of Rome La Sapienza ( email )

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Roma, 00185
Italy
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HOME PAGE: http://sites.google.com/a/uniroma1.it/marcomarini

Sergio Currarini

University of Leicester - Department of Economics ( email )

School of Business
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom