For a time, either R. J. Reynolds or Phillip Morris raised the prices of cigarettes twice a year by about 50 cents per carton. The other firms in the industry raised their prices by the same amount. Such behavior results in:

Question

Quizplus · Accepted Answer

The behavior described in the question is an example of price leadership, in which one or a few firms set the price for the industry, and others follow suit. In this case, either R.J. Reynolds or Phillip Morris acted as the price leader, and the other firms in the industry followed their lead by raising their prices by the same amount. This behavior is common in industries with a few dominant firms and economic conditions that allow for stable pricing.

For a Time, Either R