Collusion Flashcards
What is collusion?
Firms conduct intended to coordinate the actions of firms
What is explicit and tacit collusion?
Explicit - secret communication but proveable - messages etc
Tacit - No communication, understanding develops over time
What article prohibits collusion?
Article 101 of European commission law prohibits explicit collusion cartels
Explain the cartel environment in Europe since 1999
Total fines have increased from £30m every 5 yrs in 1999 to £305m every five years in 2019
Whatre the 3 characteristics that affect cartel sustainability
- Number of firms in the market
- Size of firms in the market
- Product differentiation in the market
Why does low product differentiation mean cartels are more likely?
Lower PD means lower profitability due to higher xped, and lower nash eqm profits, so more incentive to collude to higher prices, and harsher punishment for deviating if detected
