When companies join together to try to control prices or eliminate competition so that they exclusively benefit, it is called?

1 answer:

7 0

When companies join together to try to control prices or eliminate competition so that they exclusively benefit, it is called collusion.

Collusion occurs in oligopoly market, when oligopoly firms make joint decisions, and act as if they were a single firm to control prices or eliminate competition. Collusion requires an agreement between cooperating firms, the agreement can be either explicit or implicit, in order to restrict output and achieve the monopoly price.

So this causes the firms to be interdependent, as the profit levels of each firm depend on the firm’s own decisions and the decisions of all other firms in the industry.

Hence, an example of illegal collusion is a secret agreement between firms to fix prices.

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