Final answer:
Mutual forbearance is a strategy of tacit collusion, where parties agree not to compete aggressively to maintain a stable market environment. It is commonly used by businesses to avoid price wars and maintain market share.
Step-by-step explanation:
Mutual forbearance is a strategy of tacit collusion. It refers to the understanding between two or more parties to refrain from competing aggressively with each other in order to maintain a stable market environment. This strategy is often used by businesses to avoid price wars and maintain their market share.
For example, in the airline industry, competitors may agree to limit the number of flights on certain routes to prevent excessive competition and maintain higher ticket prices. This tacit agreement allows each airline to have a reasonable profit margin without engaging in open collusion.
The primary goal of mutual forbearance is to ensure stability and avoid disruptive competition. By limiting aggressive behaviors, businesses can benefit from a more predictable market environment and avoid unnecessary conflicts.