Barometric price leadership exists when
A) one firm in the industry initiates a price change and the others follow it as a signal of changes in cost or demand in the industry.
B) one firm imposes its best price on the rest of the industry.
C) all firms agree to change prices simultaneously.
D) one company forms a price umbrella for all others.
E) the firms are all colluding.

Question

Quizplus · Accepted Answer

Barometric price leadership occurs when one dominant firm in the industry initiates a price change and the other firms in the industry follow it as a signal of changes in cost or demand. This is a form of implicit collusion where the leading firm sets the price trend for the industry. The other firms in the industry will adjust their prices accordingly to avoid losing market share or being seen as outside the industry norm.

Barometric Price Leadership Exists When