Competing firms react to a rogue company that decides to raise its products' prices by failing to raise their prices. For example, if an oligopoly agrees to produce 10,000 barrels of oil for $200 per barrel, the choice will define the kink in the demand curve of the firms. If a firm decides to reduce its price to $ 90 per barrel, it may be able to sell around 11000 barrels, because, if it acts singly, it will increase its output at lower prices. However, if the firm raises its prices, the other firms will not raise their prices.

Thus, making the firm that raises its prices to have some significant losses. For instance, if it raises its prices to $250 per barrel, it may be able to sell only 6000 barrels. Therefore, firms in an oligopolistic system, always matching cuts in prices but not price increments, will give no incentives to other firms to shift their prices, as the possible gains are minimal.