The model of the kinked demand curve implies that
a strong brand loyalty means there is little incentive for firms to cut price.
b rivals will match any price increases but tend to ignore any price cuts a firm makes.
c rivals will match any price decrease but tend to ignore any price increases.
d firms will coordinate prices to maximize group profit.

The correct answer is option C.

Explanation:

The kinked demand model was given by Paul M Sweezy. It states that the demand curve of an individual oligopoly firm has a kink in it. The demand curve has two different elasticities.  

We know that in an oligopoly market there are very few firms. These firms are interdependent and price decisions of a firm affect their rivals. So price generally remains sticky as an oligopoly firm has to consider its rivals' reaction before changing the price.  

When a firm decreases its price, its rivals will also decline their prices. Thus the firm will not be able to gain profits from the price reduction.  

On the other hand, if a firm increases its prices, the rivals will not follow. the firm will, as a result, will lose some of its market shares. This is why the demand curve of an individual firm has a kink at the prevailing price.

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