Barriers
There can be significant barriers to collusion. In any given industry, these may include:
- The number of firms: As the number of firms in an industry increases, it is more difficult to successfully organize, collude and communicate.
- Cost and demand differences between firms: If costs vary significantly between firms, it may be impossible to establish a price at which to fix output.
- Cheating: There is considerable incentive to cheat on collusion agreements; although lowering prices might trigger price wars, in the short term the defecting firm may gain considerably. This phenomenon is frequently referred to as "chiseling".
- Potential entry: New firms may enter the industry, establishing a new baseline price and eliminating collusion (though anti-dumping laws and tariffs can prevent foreign companies entering the market).
- Economic recession: An increase in average total cost or a decrease in revenue provides incentive to compete with rival firms in order to secure a larger market share and increased demand.
Read more about this topic: Collusion
Famous quotes containing the word barriers:
“... in love, barriers cannot be destroyed from the outside by the one to whom the cause despair, no matter what he does; and it is only when he is no longer concerned with them that, suddenly, as a result of work coming from elsewhere, accomplished within the one who did not love him, these barriers, formerly attacked without success, fall futilely.”
—Marcel Proust (1871–1922)
“There are two barriers that often prevent communication between the young and their elders. The first is middle-aged forgetfulness of the fact that they themselves are no longer young. The second is youthful ignorance of the fact that the middle aged are still alive.”
—Jessamyn West (1902–1984)
“Emancipation should make it possible for woman to be human in the truest sense. Everything within her that craves assertion and activity should reach its fullest expression; all artificial barriers should be broken, and the road towards greater freedom cleared of every trace of centuries of submission and slavery.”
—Emma Goldman (1869–1940)