2.3TACIT COLLUSION 1. Dominant Firm Price Leadership Figure 2(a) shows the total demand curve. The supply curve for all the followers is also shown all other firms These firms accept the price set by the leader and their joint suppl curve is simply the sum of their MC curves The leaders demand curve can be seen as that portion of market demand unfilled by the other firms. Atp the whole of market demand is satisfied by the other firms and so the demand for the P D le ader SD ader is zero (point a). At Pi the other firms'supply is zero, and so the leader faces the full market Quantity emami tpoint b). The leade demand curve thus connects points (Division of market between leader aan o wers2. 3 TACIT COLLUSION --1. Dominant Firm Price Leadership D leader P P1 Figure 2(a) shows the total demand curve. The supply curve for all the followers is also shown. These firms accept the price set by the leader and their joint supply curve is simply the sum of their MC curves. The leader’s demand curve can be seen as that portion of market demand unfilled by the other firms. At P the whole of market demand is satisfied by the other firms, and so the demand for the leader is zero (point a). At P1 the other firms’ supply is zero, and so the leader faces the full market demand (point b). The leader’s demand curve thus connects points a and b. (Division of market between leader and followers 0 Quantity Price S all other firms D market