Which pricing strategy is defined by the market leader setting the price that other firms in the market follow?

• A. Dynamic pricing.
• B. Price leadership pricing.
• C. Market skimming.
• D. Captive pricing.

Answer: (B)

Price leadership pricing happens when the dominant firm in a market sets the price and other firms follow that price. In markets with a clear leader, rivals align their prices to the leader to maintain price stability, avoid price wars, and meet customer expectations that the leader’s price is the standard. This makes the leader’s price the reference point others replicate.

Dynamic pricing adjusts prices in real time based on demand, supply, or other factors, not tied to followers in the market.

Market skimming sets a high initial price to maximize early profits from first adopters, then lowers it over time.

Captive pricing sells a core product cheaply but charges higher prices for necessary complementary items or services.

So the statement describes price leadership pricing, where the market leader effectively sets the price that others in the market follow.