DOMINANT FIRM OLIGOPOLY – PRICE LEADERSHIP
The dominant firm sets a price and lets the small follower firms sell all they want at that price.
Thus, the small firms are in a position of being a price-taker just as in perfect competition. They adjust output according to the price they face.
The dominant firm then sells to residual demand left over from the small firms, using the MR = MC rule to establish its output, at the corresponding price referenced above.
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