Decision Making under Conditions of Turbulence and Uncertainty: The Case of the Kinked Demand Curve

This paper is an attempt to place oligopoly price stickiness into a pure uncertainty framework. Using the concept of the "reliability ratio," developed by Robert Heiner, the authors are able to show that price stickiness is a rational response to the demand uncertainty generated by oligopolistic market structures. Their model is capable of explaining how equilibrium prices change when the structure of the industry changes. The authors present an empirical model and tests of their hypothesis.