Price Leadership

Price Leadership

Definition of Price Leadership

It’s when the leading business in a market chooses the pricing for items or services.

Price Leadership

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.

Price Leadership

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.

Price Leadership