Question

Kit-N-Sit and Kittysitters are two cat-sitting services in Kent, Ohio. There are no other cat-sitting services, so the market is considered to be a duopoly. According to the kinked demand curve theory, if Kit-N-Sit cuts prices, Kittysitters will

Answer 1

also cut its prices.

Step-by-step explanation:

the kinked demand theory is based on the premise that prices in oligopoly or duopoly markets tend to be very rigid and the participating industries are not very responsive to price changes. I.e. competitors will tend to respond more to a price decrease than to a price increase. In this case, Kittysitters will only change their prices if Kit-N-Sit decreases them. Instead, if Kit-N-Sit increased their prices, Kittysitters would do nothing.