The steel industry has typically been a good example of the price leader type of cartel. This practice is not without its problems. In the U. S. this type of activity is subject to antitrust prosecution. There is also no guarantee that the other firms will follow. The more the product is differentiated, the less effective this tactic will be.
Some firms try to cheat on the agreement by cutting the prices.
This approach seems to ignore the demand curve, since price is a function of cost, not demand. A mark-up system simplifies the pricing process . If firms in the same industry have similar costs, the use of the mark-up will tend to give you prices across the industry that are similar. Mark-up is designed to cover the cost elements that do not vary with output. Sometimes mark-up includes a rate of profit.