Question

How the barometric price leadership works? Provide an instance.

Answer 1

Barometric price leadership is an independent player in the market and has little power on others to impose the pricing decisions in the industry. It is named because one company acts as the “barometer” or the benchmark of market prices. The work of a company is to set the price of products in its market segment or industry and other companies in the same industry follow the suit. The barometer company, being adept and skillful at identifying the change in the market conditions or consumer demands or production costing in a better position to determine the prices. This ability to identify market trends gives them the price leadership in the market. Other companies or competitors finds it simply beneficial to follow the leader than to discover the main sources responsible.

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