Economics Oligopoly Questions
Price collusion theory in oligopoly refers to the concept where firms in an oligopolistic market collude or cooperate with each other to set prices at a higher level than what would be determined under competitive conditions. This collusion allows the firms to maximize their joint profits by reducing competition and maintaining higher prices. It often involves agreements or understandings between the firms regarding pricing strategies, output levels, market shares, or other aspects of their operations. Price collusion theory is based on the assumption that firms in an oligopoly have the ability and incentive to coordinate their actions to manipulate prices and restrict competition.