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LSDefine
Simple English definitions for legal terms
price leadership
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A quick definition of price leadership:
Price leadership is when a company that is a leader in its industry sets a price for its products or services that other companies in the same field follow. This is not illegal as long as there is no evidence of an intention to create a monopoly.
A more thorough explanation:
Price leadership is a situation in a market where a company that is a leader in the industry sets a price for a product or service, and other companies in the same industry follow suit by setting their prices at the same level. This is usually done by the company with the largest market share or the most influence in the industry.
For example, if Apple sets the price for its latest iPhone model at $1,000, other smartphone manufacturers may follow suit and set their prices at a similar level. This is because they do not want to lose customers to Apple, who may be willing to pay a premium for the latest technology.
Another example is the airline industry, where one airline may set the price for a particular route, and other airlines will match that price to remain competitive.
Price leadership is not illegal on its own, but it can be a concern if it is used to create a monopoly or to collude with other companies to fix prices. Antitrust laws are in place to prevent such practices.