Topic summary
Collude
Extracted from the Wikipedia article Collusion.
Variations
According to neoclassical price-determination theory and game theory, the independence of suppliers forces prices to their minimum, increasing efficiency and decreasing the price-determining ability of each firm. However, if all firms collude to increase prices, loss of sales will be minimized, as consumers lack choices at lower prices and must decide between what is available. This benefits the colluding firms, as they generate more sales at the cost of efficiency to society. However, depending on the assumptions made in the theoretical model on the information available to all firms, there are some outcomes, based on Cooperative Game Theory, where collusion may have higher efficiency than if firms did not collude.