25.7k views
1 vote
During the 1990s, one of the dominant firms in the U.S. cigarette industry would raise prices once or twice a year by about 50 cents per carton. Other firms in the industry typically raised their prices by the same amount. This is an example of:

1 Answer

7 votes

Answer:

This is an example of price leadership.

Step-by-step explanation:

Price leadership is a type of practice where a firm, most likely a dominant one, sets the price and other firms follow it. It is commonly seen in an oligopoly market.

In an oligopoly market, there are a few firms, these firms are interdependent. A price change by one firm affects its rivals.

Price leadership is of different types.

  • Barometric
  • Collusive
  • Dominant

So when a dominant firm changes its price, the followers have to follow it if we they want to retain their market share.

User Sangam Uprety
by
8.3k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.