collusion
(noun)
A secret agreement for an illegal purpose; conspiracy.
Examples of collusion in the following topics:
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Collusion and Competition
- Firms in an oligopoly can increase their profits through collusion, but collusive arrangements are inherently unstable.
- Several factors deter collusion.
- First, price-fixing is illegal in the United States, and antitrust laws exist to prevent collusion between firms.
- Finally, a firm may be discouraged from collusion if it does not perceive itself to be able to effectively punish firms that may break the agreement.
- In contrast to price-fixing, price leadership is a type of informal collusion which is generally legal.
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Price Leadership
- Price leadership is a form of tacit collusion that oligopolies may use to achieve a monopoly-like market outcome.
- An alternative to overt collusion is tacit collusion, in which firms have an unspoken understanding that limits their competition.
- For example, the steel, cars, and breakfast cereals industries have all been accused of engaging in tacit collusion..
- Tacit collusion can be difficult to identify.
- The fact that a price change by one firm is follwed by similar price changes among other firms doesn't necessarily mean that tacit collusion exists.
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Cartel Example
- A cartel is a formal collusive arrangement among firms with the goal of increasing profits.
- Assess the role of competition and collusion in the formation of cartels
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Price Fixing
- Price fixing is a collusion between competitors in order to raise prices of a good or service, at the expense of competitive pricing.
- As it is commonly understood, the term "price fixing" refers to a collusion between sellers in a market to coordinate pricing--usually pushing it above the competitive level--for their collective benefit.
- Neelie Kroes said she was "very disappointed" that the collusion took place at the very highest (boardroom) level.
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Game Theory Applications to Oligopoly
- For example, game theory can explain why oligopolies have trouble maintaining collusive arrangements to generate monopoly profits.
- Because the incentive to defect is strong, firms may not even enter into a collusive agreement if they don't perceive there to be a way to effectively punish defectors.
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Value-Based Pricing
- Some constraints are formal, such as government restrictions in respect to strategies like collusion and price-fixing.
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Alternative Philosophies
- It reduces the risk of collusion between individuals.
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Inputs to Accounting
- The former requires only a management override, while the latter requires collusion with other departments.
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Antitrust Laws
- This was more recently updated via the Treaty of Lisbon, which further addresses mergers and acquisitions and bans price fixing and collusion.
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Duopoly Example