kinked Definition

A kinked demand curve is a hypothetical model of demand faced by firms in an oligopolistic industry, where each firm's demand curve is thought to be 'kinked' or angled at the prevailing price. Below the prevailing price, competitors are assumed to match any price cut but not match a price increase, and above the prevailing price, competitors are assumed to match any price increase but not match a price cut. This model aims to explain why prices in such markets tend to be stable.