Kinked demand curve is the type of curve found in oligopoly.

Oligopoly is a market structure in which there are only a few large firms that dominate the market. These firms have a significant influence on the market price and can impact each other's decisions. As a result, the demand curve facing an oligopolistic firm is different from that of a perfectly competitive or monopolistic firm.

The kinked demand curve is a graphical representation of the behavior of firms in an oligopolistic market. It suggests that when one firm changes its price or output, other firms in the market will also adjust their prices or outputs in response. This interdependence among firms creates a situation where the demand curve facing each firm becomes more elastic above the current price and less elastic below the current price.

Explanation of the kinked demand curve:

1. Elastic above the current price:
- When a firm raises its price above the current market price, other firms are unlikely to follow suit.
- The demand for the firm's product becomes more elastic because consumers are more likely to switch to the lower-priced products of other firms.
- This leads to a significant decrease in the quantity demanded for the firm's product.

2. Inelastic below the current price:
- When a firm lowers its price below the current market price, other firms are likely to follow suit to avoid losing market share.
- The demand for the firm's product becomes less elastic because consumers are less likely to switch to other firms' products, as their prices are also lowered.
- This leads to a relatively smaller increase in the quantity demanded for the firm's product.

The kinked demand curve is characterized by a discontinuity or a kink at the current price level. This kink represents the assumption that firms are more concerned about losing market share than gaining it. As a result, the market price tends to remain stable, and there is a level of price rigidity in oligopolistic markets.

The kinked demand curve has important implications for the behavior of firms in oligopoly. It suggests that firms may engage in non-price competition, such as advertising, product differentiation, or strategic alliances, to gain a competitive advantage without changing prices. It also explains why oligopolistic markets often experience periods of price stability and why firms may engage in strategic behavior to avoid price wars.