oligopoly Flashcards
what is overt collusion?
a formal agreement between firms (firms communicated)
what is tacit collusion?
an unspoken agreement between firms (firms haven’t communicated)
what can overt collusion include?
a formal signed agreement
ceo reached a formal agreement over the phone
agreeing in person
why doesnt the CMA not like overt collusion?
overt collusion allows them to avoid competition
charge high prices
which is unfair to collusion
what have the CMA done to collusion?
made overt collusion illegal leading to fines if caught
example of collusion?
british airways (fined 270mil)
virgin atlantics (they whistle blowed and their firm receives immunity from fines and british airways lose profit)
with high ticket prices
why is whistle blowing a good thing?
you get immunity and your competition get a big fine
what is a cartel?
many firms working together
what is an example of public collusion?
OPEC oil company
13 countries
collude to keep prices high
they get away with it because its countries colluding not company’s
example of tactic collusion?
baked beans in supermarkets
chicken shops
four types of price competition
limit pricing
predatory pricing
price skimming
price wars
why are price wars dangerous?
limits snp’s as firms are constantly trying to undercut one another
example of price wars
bake beans in 90s
3p a can in supermarkets
what is predatory pricing?
when firms force down prices below their AVC curve to force out competitors
what does predatory pricing do in the short run? and long run
it makes firms incur a loss
but in the long run then=y can gain market shares
