Vol: 7, Issue: 1 2017

Page: 37-42

Price Leadership, Comparative Cost and Advantage in the Theory of International Trade

Dr. Suhasini Parashar

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 firm’s 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.