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Many jurisdictions deem collusion to be illegal as it violates competition laws and is regarded as anti-competition behaviour. The EU competition law in Europe prohibits anti-competitive practices such as price-fixing and competitors manipulating market supply and trade.
This type of collusion is generally not considered illegal, so companies guilty of tacit conspiracy should face no penalties even though their actions would have a similar economic impact as explicit conspiracy. Collusion results from less competition through mutual understanding, where competitors can independently set prices and market share. [5]
In competition law, some sources use conscious parallelism as a synonym to tacit collusion in order to describe pricing strategies among competitors in an oligopoly that occurs without an actual agreement [9] or at least without any evidence of an actual agreement between the players. [10]
Examples are Cournot oligopoly, and Bertrand oligopoly for differentiated products. Bain's (1956) original concern with market concentration was based on an intuitive relationship between high concentration and collusion which led to Bain's finding that firms in concentrated markets should be earning supra-competitive profits.
"The Kinky Oligopoly Demand and Rigid Prices" The Journal of Political Economy Vol. 55, pp. 432-449. Stigler, G. 1978. "The literature of economics: the case of the kinked oligopoly demand curve" Economic Inquiry Vol. 16, pp. 185–204. Sweezy, P. 1939. "Demand Under Conditions of Oligopoly" The Journal of Political Economy Vol. 47, pp. 568-573.
The emergence of oligopoly market forms is mainly attributed to the monopoly of market competition, i.e., the market monopoly acquired by enterprises through their competitive advantages, and the administrative monopoly due to government regulations, such as when the government grants monopoly power to an enterprise in the industry through laws ...
If the price of a new supplier is lower than the usual corporate bidding price, the reason may be that there is a collusion of bidding among existing companies. If the price of a new supplier drops significantly after bidding, the reason may be that some suppliers have been colluding and the new supplier has forced them to compete. [35]
Monopolistic competition indicates that enterprises will participate in non-price competition. Monopolistic competition is defined to describe two main characteristics of a market: 1. There are many sellers in the market. Each vendor assumes that a slight change in the price of his product will not affect the overall market price.