What is the potential drawback if firms follow a price leadership model in an actual market?
A) The price leader's behavior may be interpreted as collusion and be subject to antitrust sanctions.
B) Excessive price signalling may force all of the firms to adopt price-taking strategies, which reduces overall profits among the firms.
C) Disputes about which firm should be the price leader may lead to price wars.
D) Signalling efforts increase the firms' fixed costs of production.

Question

Quizplus · Accepted Answer

Price leadership can be seen as a form of collusion, especially if it results in anti-competitive practices, which can attract antitrust sanctions from regulatory bodies.

What Is the Potential Drawback If Firms Follow a Price