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Explain the pricing under price leadership

Explain the pricing under price leadership.

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The price leadership implies the leading firm finds out the price and others follow this. All the firms in the industry adjusts, the price fixed through the price leader.

The large firm that that fixes the price is termed as the price maker and the firms, who follow this, are termed as price –takers. Four types of the price leadership are there. These are:

1. Dominant price leadership: Under this situation, there exist many minute firms and one large firm and the huge firm fix the price and the small firms under the market accept such price.

2. Barometric Price Leadership: In this situation one reputed and experienced firm’ price fixes and others may follow this.

3. Aggressive Price Leadership: In this market condition, one dominating firm fixes the price as well as they compel all others within the industry to follow the price.

4. Effective Price Leadership: In this condition, there is small number of firms within the industry.

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