Kinked demand

Therefore, the first derivative point is undefined and leads to a jump discontinuity in the marginal revenue curve.

From Queen's College in Oxford, Robert Lowe Hall and Charles J. Hitch wrote "Price Theory and Business Behavior," presenting similar ideas but including more rigorous empirical testing, including a business survey of 39 respondents in the manufacturing industry.

Hall and Hitch further present a hypothesis for the initial setting of prices; this explains why the "kink" in the curve is located where it is.

His primary opposition is summarized in a Working Paper out of the Stanford University Economics Department by seminal authors Elmore, Kautz, Walls et al. New classical economists, led by Chicago’s George Stigler, worked to discredit the kinked demand models.

Stigler also asserts that the model is unnecessary because Chicago theory already included allowances for short-run sticky prices due to collusion, menu costs, and regulatory or bureaucratic inefficiencies in markets.