Definition of Price Leadership
It’s when the leading business in a market chooses the pricing for items or services.
Description of Price Leadership
This method doesn’t give the competition much room to make their own decisions, so they just offer the same prices so that they can keep their part in the market share.
Advantages of Price Leadership
When a price leader increases the prices, rivals do just the same, allowing everyone to increase their profits. This remains true if shoppers continue to purchase the item or service.
Disadvantages of Price Leadership
Often times, though, those who are market leaders are constantly lowering their prices, so the smaller businesses have to do so as well. However, since they aren’t as big, in an attempt to remain within the market, they may end up hurting themselves and then shutting down in the long run.