When is there a gap in the kinked demand curve theory?

The kinked demand curve theory exhibits a gap in price elasticity at the kink point, where firms face different elasticities of demand above and below this price. This gap arises because firms believe that if they increase prices, competitors will not follow, leading to a loss of market share, while if they decrease prices, rivals will match the decrease, resulting in minimal gain in market share. Consequently, this creates price rigidity, as firms are reluctant to change prices due to uncertain responses from competitors.