Economics for Today 9th Edition by Irvin Tucker

Exercise 12

Suppose Canon raised the price of its printers, but Hewlett-Packard (the largest seller) refused to follow. Two years later Canon cut its price, and Hewlett-Packard retaliated with an even deeper price cut, which Canon was forced to match. For the next five years, Hewlett-Packard raised its prices five times, and each time Canon followed suit within 24 hours. Does the pricing behavior of these printer industry firms follow the cartel model or the price leadership model? Why?