Question

When firms in an oligopoly collude without an explicit agreement, economists say they are involved in ________ collusion.a. illegal b. tacit c. game theoretic d. predatory e. marginal

Answer 1

Answer:

b. tacit

Explanation:

Collusion is a fraudulent agreement entered into between various parties in order to obtain mutual benefits. The term is used in law to refer to illegal agreements. When several companies enter into this agreement, called the collusive agreement, they form a cartel. Such is, for example, the Organization of Petroleum Exporting Countries, or other cases of agreements between multinational companies in the food sector. It is in most cases tacit (tacit collusion): companies stop competing on the price in order to maximize profit by increasing the leverage of productivity or the research and development of new products / services

Tacit collision is when firms select actions to minimize the response of another firm. We can say an example of avoiding the opportunity to cut prices will cut one opposition as it will retaliate against the opposition. In other words, the two firms agree to play a specific strategy without explicitly saying it. Oligopolists mostly inten to avoid price reductions, excessive advertising or other forms of competition. Therefore, there may be unwritten collective codes of behavior, such as pricing (hidden collectivization). One price manager will then emerge and determine the overall industry price and other companies will follow.