Economics Oligopoly Questions
Price leadership in an oligopoly market refers to a situation where one dominant firm, known as the price leader, sets the price for a particular product or service, and other firms in the industry follow suit by adjusting their prices accordingly. The price leader typically has a significant market share and is considered to be the most influential firm in the industry. The other firms in the oligopoly market observe and react to the price changes made by the price leader, as they believe that the price leader has a better understanding of market conditions and is making rational pricing decisions. Price leadership can occur either through explicit agreements among firms or through tacit understanding and observation of market dynamics.