when the price leader is the one who assume to be either an old or experienced or largest and most respected firm is called _______________. 1 point price leadership by a dominant firm aggressive price leadership baro matric price leadership price leadership by a low cost firm
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Another form of collusion is price leadership. In this form of coordinated behaviour of oligopolists one firm sets the price and the others follow it because it is advantageous to them or because they prefer to avoid uncertainty about their competitors’ reactions even if this implies departure of the followers from their profit-maximizing position.
Price leadership is widespread in the business world. It may be practiced either by explicit agreement or informally. In nearly all cases price leadership is tacit since open collusive agreements are illegal in most countries.
Price leadership is more widespread than cartels, because it allows the members complete freedom regarding their product and selling activities and thus is more acceptable to the followers than a complete cartel, which requires the surrendering of all freedom of action to the central agency. If the product is homogeneous and the firms are highly concentrated in a location the price will be identical. However, if the product is differentiated prices will differ, but the direction of their change will be the same, while the same price differentials will broadly be kept.
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