Which of the following is the best example of tacit collusion? a) the formation of a...
Which of the following is the best example of tacit collusion?
a) the formation of a cartel
b) price leadership
c)predatory pricing
d)non cooperative pricing behavior
Homework Answers
Which of the following is the best example of tacit collusion?
Correct Answer
b) price leadership
Tacit collusion is also called as price leadership. Under this the other firms accept the price fixed by a dominant firm. Usually this is tacit or silent collusion. Here the price is fixed by the dominant firm high enough that only the cost efficient firms can able to earn profits.
ANSWER :
Option b : Price leadership.
Tacit collusion is applicable to oligopoly market and is a collusion between competitors without exchange of explicit information but a silent agreement for product related policies. Price leadership is an example of such a collusion. In this case, leader firm sets price and other competitors tacitly follow the same pricing for the product.
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