Price leadership involves a leading firm setting prices followed by others, while cartels are formal agreements among firms to control prices and limit competition.
Price leadership is a form of tacit collusion where one firm, typically the dominant competitor, sets prices which other firms then follow to maintain market stability. On the other hand, a cartel is a formal agreement among competing firms to control market prices and limit competition, often leading to monopoly-like outcomes.
Price leadership operates within legal boundaries and involves a leading firm influencing market prices indirectly, while cartels are illegal in many countries due to their aim of raising prices and restricting output.
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