Three Companies Secretly Enter Into A Price Agreement

For example, game theory may explain why oligopolies struggle to maintain collusive agreements to obtain monopoly profits. While collectively, companies would be better off if they cooperated, each company has a strong incentive to deceive and undervalue its competitors in order to increase its market share. Since the incentive to overflow is strong, companies can`t even make a collusive deal if they don`t think there`s a way to effectively punish defectors. Price agreements require a conspiracy between sellers or buyers. The goal is to coordinate pricing for the mutual benefit of merchants. It also depends in part on how difficult it is for companies to monitor compliance with the agreement by other companies. If monitoring is difficult, it is likely that a member will get away with fraud for longer; Members would then be more likely to cheat and the agreement would become more unstable. While price agreements generally mean that sellers agree on the price, they can also include agreements between buyers to determine the price at which they will purchase products. According to, the practice of “conscious parallelism” is not a strict collusion, as it is not the result of actual agreements between companies. Rather, it is a situation that produces the same results of collusion, without any real consultation. It occurs as a result of a general sense of competition that they should charge the same price for similar products.

For example, if an oil company raises its gasoline prices due to rising production costs, other oil companies can follow suit, even if they don`t have an increase in production costs, allowing them to increase their profit margin without fear of being underestimated by the first company. Based in South Korea, LG Display would pay $400 million, the second heaviest fine ever imposed by the U.S. Department of Justice`s antitrust department. Chunghwa would pay $65 million for conspiring with LG Display and other limited companies and Sharp would pay $120 million, according to the division. [26] Companies can also cooperate with each other by limiting the amount of information that consumers can learn about their products through advertising. This may mean that the parties involved agree not to disclose technical facts about their products in advertisements, but rather to rely on generic advertising methods that do nothing but attract the attention of customers and remind them of the product and brand. In its article “The Three Types of Collusion,” Land and Marvel described how the California Dental Association put in place rules prohibiting members of the association from posting comparative ads. In 2006, the French Government fined 13 perfume brands and three sellers for price cartels between 1997 and 2000. Brands include L`Oréal (€4.1 million), Pacific Creation Perfumes (€90,000), Chanel, LVMH`s Sephora (€9.4 million) and Marionnaud de Hutchison Whampoa (€12.8 million).

[23] In the Bertrand model, the optimal price of Company A depends on where, in his opinion, Company B will set its price. . . .