Last modified on August 29, 2007, at 23:25

Dominant demand curve

The dominant demand curve, or dominant firm model, applies to an oligopoly where one large firm sets the price for the entire industry. This firm is known as the price leader. The less the market share of this firm, the more elastic is its demand curve and the lower the resultant price.

This model is not very different from a model of a monopolist setting the price. But this dominant firm model only applies if there is limited entry into the industry.