Price Leadership, Comparative Cost and Advantage in the Theory of International Trade
Dr. Suhasini Parashar
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Abstract
The modern theory of International trade asserts specialization a technique whereby an international
specialization depends on geographical factors , occupational distribution of labor force , use of
resources , means of transportation , degree of self sufficiency .The law explore International trade is a
mutual trade. Price leadership may emerge spontaneously due to technical reason as size of efficiency in
economies of scale, ability to forecast the market condition or out of tacit or explicit agreement between the
firms to assign a leadership role to one of them. An opportunity cost theory , the theory of value , laws of
comparative cost and comparative advantage , and production possibility helps to explain transformation
of resources .The Standard theory of International Trade in the production of commodity helps to promote
the trade which is effective by comparative differences in labor cost but by absolute difference in money
cost . The aspect of price leadership is that it often serves as a means to price discipline and price
stabilization, effective price leadership when firms small, restricted entry, similar cost inelastic or low
elasticity , homogeneous product, substantial share of the market have greatest share in the market new
labor agreement . The Industry /firm takes the initiatives in following the price of price leader in the
market, sound pricing decision based on better information and more experienced judgment as grow the
industry, due to management and long experience in marketing matters . In different market the price
behavior affects the market behavior. Cyclical fluctuation under price leadership, prices is not very high or
destructive price war. In this article, the purpose is to evaluate subject matter of the international trade in
terms of price leadership and comparative cost and advantage.
Keywords: Effectiveness; Efficiency; Mutual trade; Price discipline; Specialization
References
- Economics – P.A.Samuelson and W.D.Nordhus Tata McGraw –Hill Edition (Latest Edition)
- Principles of Economics Karl E.Case Ray C.Fair - Prentice Hall Pearson Education (Latest Edition )
- The Indian Economy Environment and Policy -Sultan Chand & Sons (Latest Edition )
- Business Environment - Cherulin – Pearson Education
- www.interntionaltrade.com