An Agreement Between Two Or More Firms On The Price They Will Charge For A Product

In 2010, OFT RBS and Barclays found themselves guilty of secret work in sharing price agreements for loans to professionals such as lawyers and accountants. The dissemination of price information is a way to avoid price competition and keep prices high. RBS was fined $28.59 million. (Independent) In 2015, Apple and Google were investigated over an agreement between the two companies, in which they agreed not to hire employees of the other company. It was an attempt to avoid wage spirals, because workers move between companies. The companies agreed to reach a transaction rather than bring it to justice. Journal Description Strength Weakness On the product line selection problem under attraction choice models of consumer behaviour (Schon, C., 2010) Supermarket prices have increased by three pence per pint of milk, but farmers` incomes have not increased. BBC Milk Agreements After a period of low milk, butter and cheese prices, supermarkets such as Asda and Sainsbury`s have agreed with dairy suppliers Dairy Crest and Wiseman Dairies to raise prices for milk, cheese and other dairy products in supermarkets. Supermarkets and suppliers were fined a total of $116 million following an investigation. In the example above, a competitive industry will make P1 and Q prices competitive. When companies collide, they can limit production to Q2 and increase the price to P2. In 2007, British Airways was fined $270 million for illegally agreeing prices with Virgin on long-haul flights. The two companies met to agree on the additional price of fuel surcharges in response to rising oil prices.

Between 2004 and 2006, airfare surcharges increased from $5 to $60 per ticket. The $270 million fine amounted to an annual profit of $611 million for BA. BBC link on collusion. The optimal outcome for companies is to conflict (high price, high price) However, it depends on the incentive to cooperate in the tendering process for public works, and construction companies would work together to set artificially high prices. Companies would choose the contracts they want and their rivals would offer high prices. This is a practice known as « Cover Pricing. » Successful companies would often reward their rivals with a secret payment to avoid competitive competition.

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