What is the term for when a dominant firm sets the price for a product and similar manufacturers follow suit?

The term for when a dominant firm sets the price for a product and similar manufacturers follow suit is known as price leadership. This concept occurs in an oligopolistic market structure where one powerful company takes the initiative in setting prices; this leader often has a significant market share and competitive advantage over others.

When the dominant firm establishes a price point, it signals to its competitors that they can match or align their pricing strategies accordingly to maintain market stability and avoid price wars. This practice can benefit all firms in the market because it fosters predictability, allowing smaller or less influential companies to adjust their prices without needing to engage in heavy competition on their own.

Price leadership plays a crucial role in maintaining overall market equilibrium and is a strategic approach that allows firms to maintain profitability while minimizing conflict within the market.

The other options represent different concepts related to pricing strategies but do not directly pertain to the behavior of a dominant firm influencing competitors' pricing.