The 'Kinked Demand Curve' model, developed by Paul Sweezy, explains price rigidity in an oligopoly by assuming that rival firms will match a price cut but ignore a price increase.

Answer: True

Sweezy's model posits that if an oligopolist raises prices, rivals will keep their prices low to steal market share (highly elastic demand above the kink). If the firm cuts prices, rivals will immediately match the cut to avoid losing customers (inelastic demand below the kink). This creates a 'kink' at the prevailing price, making the marginal revenue curve discontinuous and rendering small cost shocks incapable of changing the market price.