Question

In Implicit Collusion, Price Leadership Mode. One firm will be the leader (dominant firm). The firm...

In Implicit Collusion, Price Leadership Mode.

One firm will be the leader (dominant firm). The firm will determine the price and other firms need to take the price (Price taker).

Questions: How will the leader determine the market price?

As many details as you can. Thank you

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Answer #1

Mostly in Implicit collusion, the leader firm sets the price which is taken up by other competitor firms. The firms are aware about each other firms and the pricing and branding activities of other firms.

Mostly, what happens practicaly is a firm raises price of its product and is carried out by other competitor firms also seeking :

1. Season's Demand: Umbrella in rainy season, price of mineral water in summer etc

2. Demand because of change in government's policy

3. CHange in customer's prefernence

The hike in price is done after a market research taking market share of the product and the siz of the industry and most importantly brand loyalty of its customers.

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