Question

Question 2

Why do oligopolists rely on a price leader to raise the market price of a product?

Answer 1

Solution- In oligopolistic market few firms operates in the market Price leader form of oligopolist is (most probably) is the firm with highest share in the market or the biggest in the market Small firms can't raise the price because other firms will not raise the price and the firm which raises price will lose the market share on Customers. So, In oligoploy price rise is not followed but price reduction is immediately followed by all firms. So, all other firms rely on the price leader to raise the price because biggest firm will not lose significant market share and Customers will not be losed thats why other firms rely on market leader.