Small Leading Firms*

JEFFREY T. La France, Andrew Schmitz and David Zilberman

The Economic Record, 1984, vol. 60, issue 2, 160-164

Abstract: We formally analyze the question of whether a price leader must control a large share of the market. Our main result is that if other producers have rising marginal costs and behave as price takers, even the smallest firm in a competitive industry with a rising supply curve can enhance its profits by cutting output and raising price, becoming a price leader. Therefore, we would expect pure competition to be destroyed under these technological conditions.

Date: 1984
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