The kinked demand hypothesis is designed to explain in the context of oligopoly ___________.

price and output determination

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price rigidity

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price leadership

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collusion among rivals

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Solution

The correct option is B price rigidity
Kinked demand curve has been formulated basically to explain the pricing strategy in oligopolistic competition. It is mainly used to explain the sticky prices in oligopoly. Hence, the kinked demand hypothesis is designed to explain in the context of oligopoly price rigidity.

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