What is Barometric Price Leadership?


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In barometric price leadership, one firm announces a change in price that it hopes will be accepted by others.  The leader need not be the largest firm in the industry.  Infact, this leader may actually change from time to time.  The leader must, however, be reasonably correct in its interpretation of changing demand and cost conditions so that suggested price changes will be accepted and stick.  In essence, the barometric price leader merely initiates a reaction to changing market conditions that other firms find in their best interest to follow.  These conditions might include such things as cost increases (or decreases) and sluggish (or brisk) sales accompanied by inventory build-ups (or shortages) in the industry.


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