The pricing strategy in which one firm is allowed by its rivals to establish the market price for all firms in the market is called
A)Overt collusion.
B)Price leadership.
C)Pattern pricing.
D)Price-fixing.

Question

Quizplus · Accepted Answer

Price leadership is a situation where a dominant firm in the market sets the price, and other firms follow suit. Other firms allow the dominant firm to set the price because they believe that the dominant firm has the best knowledge of the market and will set the price such that they all benefit. The leader sets the price and quantity, and other firms follow. This strategy is legal as long as firms come up with prices independently, not through collusion.

The Pricing Strategy in Which One Firm Is Allowed by Its