c) Collusion

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9 Terms

1
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  • collusion


  • when firms work together to fix pricing and restrict output


2
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  • overt collusion


  • when firms explicitly agree to collude


3
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  • the methods of overt collusion


  • cartels

  • price fixing

  • output quotas


4
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  • tacit collusion


  • when firms monitor and follow each others pricing and output


5
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  • the methods of tacit collusion


  • price leadership


6
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  • price leadership


  • when firms follow the pricing of the dominant firm


7
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  • the reasons firms may collude


  • higher profit

  • less competition

  • interdependence


8
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  • the reasons firms may not collude


  • it is illegal

  • it is difficult to enforce

  • there is an incentive to cheat


9
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  • the effects of collusion on consumers/firms


  • high prices

  • less investment

  • artificial scarcity

  • low product quality