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Effects: The rival firms accept the change in price in order to retain its market share. It leads not because it is large but because it is agile, and competitors find it easier to simply follow its lead than to discover the source of the market shift for themselves.
Example
In 2002, coca Cola introduced the 200ml bottle for Rs5.
Example
The automobile industry: In 2000, the Maruti Udyog Ltd. announced a price cut on its Omni model. The other firms were compelled to announce price cuts due to declining demand for domestic industry.
Example
State bank of India has always been the dominant firm in the Indian market, it fixes the rate of interest and the other banks soon follow the pricing.
Example
Starbucks is a dominant-firm price leader, with smaller chains and independent cafes being forced to price accordingly or else lose business.
(b) : Market Demand curve of Dominant firm P3DD = Demand Curve of Dominant Firm P3 MPD = MR of Dominant Firm