These economic phenomena involve different forms of cooperation among firms in an industry. While cooperation can sometimes benefit companies involved, it can also lead to anti-competitive behavior that harms consumers and undermines fair market competition. Regulatory authorities and antitrust laws exist to monitor and address such activities, ensuring that markets remain competitive and consumers have choices at reasonable prices.
A. Two Internet companies come to an agreement to charge the same amount for their services.
- This phenomenon can be described as collusion or price-fixing. Collusion occurs when competing companies, in this case, the two Internet companies, cooperate with each other to set prices at a certain level, essentially eliminating competition between them.
- This practice is generally illegal in many countries, as it can harm consumers by reducing choices and potentially leading to higher prices.
- Such agreements often result in antitrust investigations and legal action by regulatory authorities.
B. Two cable companies are forced to cease working together to set prices in their market.
- This situation reflects the breaking up of a cartel. A cartel is an association of companies that collude to restrict competition by jointly setting prices, production levels, or market shares.
- In this case, the two cable companies were collaborating to control prices in their market. When authorities discover and intervene to stop this collusion, the companies are forced to cease working together in such a manner.
- The breakup of cartels is typically aimed at promoting fair competition, preventing price manipulation, and ensuring consumer welfare.
C. Four international electronics manufacturers group together to limit the amount of computers available on the market.
- This phenomenon can be described as a supply-limiting cartel or an agreement to restrict output.
- In this case, the four electronics manufacturers are working together to limit the quantity of computers available in the market.
- By doing so, they aim to maintain higher prices and potentially increase their profit margins. This practice can harm consumers by reducing product availability and increasing prices.
The complete question is here:
Sometimes duopolists try to cooperate with one another. Match the economic phenomenon to the description that most accurately describes it.
A. Two Internet companies come to an agreement to charge the same amount for their services.
B. Two cable companies are forced to cease working together to set prices in their market.
C. Four international electronics manufacturers group together to limit the amount of computers available on the market.