Question

inspect how collusion affects consumers and society at a large

Answer 1

Answer:

Collusion occurs when rival firms agree to work together – e.g. setting higher prices in order to make greater profits. Collusion is a way for firms to make higher profits at the expense of consumers and reduces the competitiveness of the market.

collusion

In the above example, a competitive industry will have price P1 and Q competitive. If firms collude, they can restrict output to Q2 and increase the price to P2.

Collusion usually involves some form of agreement to seek higher prices. This may involve:

Agreeing to increase prices faced by consumers.

Deals between suppliers and retailers. For example, vertical price-fixing e.g. retail price maintenance. (For example, Fixed Book Price (FBP) set the price a book is sold to the public.