Question

1.) What is Price Fixing in an Oligopoly Market? Why do Oligopoly firms engage in price fixing? Is price-fixing legal or illegal in the United States?

2.) What is Price Leadership? Is Price Leadership legal or Illegal in the United States for Oligopolies? Why do Oligopoly Firms engage in Price Leadership?

Answer 1

1. OLIGOPOLY MARKET MEANING

Oligopoly market to a type of market where pure monopoly exist that is few vendor have predominance over the price fixation of a product and also be like an entity who dominate the whole market .

EXAMPLE

• Steel Industry
• Aluminium industry
• Tele Vision
• Cell Phone      

WHY FIRMS ENGAGE IN PRICE FIXING

Oligopoly market engage because it is the general tendency when big firms dominate a market there is always capacity generated to engage in such activity which helps to make profit .

Being engaged helps to control supply , maximize the joint profit , cut some cost of the competition or most important is decrease the uncertainty of the industry .

'' Price fixing is termed as criminal federal offence . This is mention under SECTION 1 of the SHERMAN ANTITRUST ACT

So price fixing is ILLEGAL IN THE UNITED STATES ''

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2.    MEANING OF PRICE LEADERSHIP

Price leadership is a process in which a dominant company set a price in a market and that price should be pursued by the other sellers in the existing / same commercial area .

EXAMPLE

• Airline industry

WHY FIRMS ENGAGE IN PRICE LEADERSHIP

BASICALLY , Sometime an agreement signed between organization to assign leadership power to any one company and that particular agreement is formal in nature . So the leader may help to stable the price of a product , maintain discipline .regarding price and to maximize the profit .

'' PRICE LEADERSHIP IS ALSO ILLEGAL IN UNITED STATES '' .