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Question

Price leadership is a form of ____________.

A
tacit collusion
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B
Over collusion
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C
Cartel
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D
Illegal collusion
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Solution

The correct option is A tacit collusion
In an oligopolistic market structure, if one of the firms is a market leader the smaller controlling firms may choose a follow the leader strategy to maintain profitability and market share. It forms an informal understanding between the major players and they indulge in a tacit collusive market strategy. Since all the firms in the oligopoly do not play an active role in determining the strategy it cannot be called a cartel.

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