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Nov 13, 2020 · Explaining the meaning and implications of collusion (when firms work together to raise price/restrict output. Examples of collusion and why it is considered against the public interest.
- OPEC
For example, Qatar might try to take advantage of the higher...
- Cartels
For example, the high price of oil encouraged other...
- Average Cost Pricing
For example, the average total cost will have to include not...
- Game Theory
Collusion and game theory. If firms are competitive and they...
- Increasing The Money Supply
For example, in 2008, a recession in the US caused the...
- Pricing Strategies
When firms set a price depending on supply and demand. For...
- OPEC
- Question
- Kaa 1
- Eval 1
- KAA2
- Eval 2
- Conclusion
Evaluate the view that collusion between firms in an oligopoly always works against consumer and society’s interests. Use game theory in your answer.
An oligopoly is where the industry or market is dominated by a few producers/firms with a high level of market concentration, where the component firms have a high level of interdependent decision making. Collusion can be tacit and/or explicit, and the aim of which is to achieve higher supernormal profits, with the firms as a whole achieving joint ...
However, collusion between firms can often derive benefits for consumers. For instance, tacit collusion includes firms who monitor what other firms sell to ensure that they are matching the cheapest price in a geographical area, or who market that consumers are “never knowingly undersold” such as John Lewis. This is a case in which firms are techni...
Collusion in an oligopoly can hugely benefit firms, which can have beneficial consequences for society. For instance, collusion between coffee growers allows small firms to push for fairer prices against more dominant monopsonistic corporations such as Starbucks. Furthermore, because these producer cooperatives like Fairtrade are often based overwh...
However, the extent to which this occurs depends on a few factors. Firstly, the vast majority of collusion that takes place isn’t that of poor farmers working together - oligopolies are more concentrated industries with very high barriers to entry, such as the Big Four Accountancy Firms, and pharmaceutical companies. Furthermore, the benefits that ...
In conclusion, the extent of the impact on consumers and firms depends fundamentally on how long the oligopoly is able to carry on collusion - we can analyse this through game theory. Assuming the following pay offs in a cartel such as OPEC, where states agree to collude to reduce production levels and benefit from a higher price: If all firms coop...
Jan 5, 2020 · Here is an example answer to a 25 mark essay question for Edexcel A-Level Economics on why firms engage in collusive behaviour.
This thesis defines collusion broadly as play in a repeated game which differs from play in a one shot game. The analysis of collusion is an important part of many branches of economics. In industrial organization, for example, if collusion were not present then we could restrict investigation to the study of oligopolistic and competitive markets.
Collusion takes place when rival companies cooperate for their mutual benefit. When two or more parties act together to influence production and/or price levels, thus preventing fair competition. Common in an oligopoly / duopoly.
May 25, 2024 · What Is Collusion? Collusion is a non-competitive, secret, and sometimes illegal agreement between rivals that attempts to disrupt the market's equilibrium....
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Jan 5, 2024 · The rule against collusion is the least controversial prohibition in competition law and is regarded with approval even by those generally sceptical of government interventions in markets. Nonetheless, some significant and challenging questions remain unanswered. For example, there
