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basis of average variable cost plus a gross profit margin (which would finance fixed costs) or average total cost with a net profit margin. Many questioned the view that such a rigid pricing policy would be followed if there were great changes in demand either making possible higher prices and greater profits or necessitating price cuts so that at least variable costs would be covered. Out of the theory came the assertion that oligopolists have a KINKED DEMAND CURVE.<br /><em>Reference</em><br />Hall, R.L and Hitch, C.L. (1939) 'Price theory and business behaviour', Oxford Economic Papers 2: 12-45.
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