Final answer:
Competitors avoid destructive competition through mutual forbearance, which is an unspoken agreement to refrain from aggressive competition in certain markets. This contrasts with explicit collusion, which is illegal and regulated by antitrust authorities.
Step-by-step explanation:
When competitors face each other in multiple markets and want to avoid destructive competition, they often participate in mutual forbearance. Unlike explicit collusion, which is an agreement among competitors to restrict output and set higher prices forming a cartel, mutual forbearance refers to a softer, more tacit understanding that companies will not engage aggressively in markets where their competitor has a significant presence. This understanding helps them to avoid costly price wars and other forms of intense competition.
Antitrust authorities prevent firms from engaging in explicit collusion, pushing companies to find alternative competitive strategies that do not violate antitrust laws. Practices such as tie-in sales, bundling, and predatory pricing represent restrictive practices that can reduce competition without formal agreements. Anticompetitive behavior, while regulated, often leads firms to subtler forms of competition that do not attract antitrust penalties.