It is important to note that these kinds of conduct may reverse the traditional causal flow so that now, conduct influences structure. Dominant-firm price leadership versus Collusive price leadership These two terms are used to distinguish price leadership undertaken by a dominant firm versus a group of several firms engaged in tacit collusion. In the case of dominant firm price leadership, the dominant firm sets or changes its price that best serves its own objectives taking into account the anticipated responses by the fringe firms in the industry. It is often observed that the fringe firms will typically follow the dominant firm's price changes, although there may be instances where the fringe firms initiate price cuts in the industry in an attempt to gain market share. This occurs whenever a seller sells the same product at more than one price.
Price discrimination is practiced by firms in many industries.
For example, the practice by long-distance telephone companies of charging different prices during different times is price discrimination. Consequently, because business callers have a fairly price inelastic demand for long-distance services, they are charged a higher price than personal callers, whose demand for long distance is fairly price elastic. Additionally, because it is impossible for personal callers to sell their evening calls to business callers, arbitrage is effectively eliminated. Price discrimination does have the potential of subduing rivals, both current and potential, and can take on the form of predatory pricing . Additionally, if a firm using price discrimination establishes brand loyalty among its customers, especially the low price ones, entry barriers may be created as a result of the cost of switching brands being too high for these customers.