Price Leadership vs Collusion

Price leadership is when one dominant firm sets a price that other firms in the industry follow, common in oligopolies.

It lets firms coordinate prices without explicit collusion, which would be illegal. The leader is usually the largest or lowest-cost firm. It is a form of tacit collusion seen in concentrated markets.

Collusion is an agreement between firms in a market to cooperate rather than compete, in order to limit competition and increase profits.

Collusion involves firms coordinating their actions to reduce competition and act like a single monopolist. This can include agreeing to fix prices, limit production, or divide the market. Collusion is illegal in many countries as it harms consumers.