Economics Oligopoly Questions
The price leadership theory in oligopoly is a concept 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. The price leader typically has a significant market share and is seen as the industry leader. The other firms in the oligopoly observe and imitate the price set by the price leader, as they believe it is in their best interest to maintain stability and avoid price wars. This theory is based on the assumption that firms in an oligopoly are interdependent and closely monitor each other's actions.