Economics Oligopoly Questions
Price leadership strategy in oligopoly refers to a situation where one dominant firm in the market sets the price for its products or services, and other firms in the industry follow suit. This firm, known as the price leader, typically has a significant market share and is considered to be the industry leader. The other firms in the oligopoly observe and imitate the price set by the price leader, as they believe that the price leader has a better understanding of market conditions and is able to maximize profits. The price leader's actions are closely monitored by other firms, and any changes in price are quickly matched by the rest of the industry. This strategy helps maintain price stability and reduces the intensity of price competition among firms in the oligopoly.