Suppose that a firm raises the price of its product by 10 per cent. Although it has no requirement or agreement to do so, the other firms decide to raise their prices accordingly. This situation is best described as:

Question

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Price leadership occurs when one leading company in an industry raises or lowers prices and other companies in the industry follow suit, even without formal agreements or obligations to do so. This scenario describes price leadership, where other firms decide to raise their prices in response to the action of one firm.

Suppose That a Firm Raises the Price of Its Product