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2 March, 00:59

Lukas owns a phone company in a city with three other phone companies. he wants to attract more customers and is considering lowering his prices to do so. according to the kinked demand curve theory, will this strategy work? fill in the blanks to complete the passage.

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  1. 2 March, 02:17
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    This strategy likely will not work. It is likely that the other companies in the industry will respond by lowering their prices. In this scenario, no firms can expect to gain new customers. According to the kinked demand curve theory, this behavior creates a demand curve that is more elastic at prices above the cartel price and more inelastic at prices below the cartel price

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    Bolded entries are the correct fill-in-the-blanks.
  2. 2 March, 04:21
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    seemingly an oligopolistic market, other companies will react by lowering their prices to the level that prices stucks. according to the kinked demand curve theory, this strategy does not produce much fruits, as it only lowers profit, in oligopolistic competition. The theory was developed to explain stuck prices.
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