why do some firms engage in collusive behaviour

Question 1

KAA 1

Answer 1

K - reduce competition
An - use game theory diagram to illustrate benefits of collusion and increased revenue
Ap - numbers in game theory diagram

Question 2

Eval 1

Answer 2

if one firm decides to lower its price, the other firm will massively suffer –> risk of collusion

Question 3

KAA 2

Answer 3

K - larger market share
An - allows greater power over suppliers allowing costs of production to be reduced
Ap - UK supermarket oligopoly with Tesco market share of 28%

Question 4

Eval 2

Answer 4

illegal nature of collusion and risk of fines