Collusion is when companies jointly set high prices, rather than compete for another company’s customers by setting low prices. Suppose a gasoline station raises its price, not because its cost is higher, but only because it wants to extract more revenue from consumers. If the other station across the street chooses to match that price, rather than charge a lower price and gain more sales, those two gasoline stations are colluding. They are working together to earn higher profit, rather than working independently, to attract more customers.
Related Articles:
- A Year in Publishing: Secret Meetings and the Powerful Threat of DigitalPublishing houses are scrambling to determine how to cope with the rise in digital reading. The iPad, the Kindle, the Nook and the Sony Reader, the strongest players in the eReader market, are four of the biggest threats to the print publishing industry. With everyone reading on a screen, how do publishers make a profit? Just this week, on December 18, Pearson Plc’s Penguin Group, a book publisher, reached a settlement with the U.S. Department of Justice in a case in which Penguin was accused of forging a deal with Apple to prevent other ebook sellers from discounting their prices. Wharton Global Youth explores this bold deal between Apple and book publishers, the resulting anti-trust lawsuit and the future of traditional book publishing.
- Baseball and Big Data: How Statistics and Analytics Are Changing the Game