collude

(verb)

To act in concert with; to conspire.

Related Terms

Examples of collude in the following topics:

  • Collusion and Competition

    • When there are few firms in the market, they may collude to set a price or output level for the market in order to maximize industry profits .
    • At the extreme, the colluding firms may act as a monopoly, reducing their individual output so that their collective output would equal that of a monopolist, allowing them to earn higher profits.
    • A firm may agree to collude and then break the agreement, undercutting the profits of the firms still holding to the agreement.

  • Price Leadership

    • Economists often simplify firm behavior into two strategies: firm can compete, in which case the market outcome will resemble that in perfect competition; or they can collude, in which case the market outcome will more closely resemble monopoly.
    • When firms collude, they use restrictive trade practices to voluntarily lower output and raise prices in much the same way as a monopoly, splitting the higher profits that result.
    • Firms can collude explicitly, as in the case of cartels, but this type of behavior is illegal in many parts of the world.

  • Cartel Example

    • A cartel is an agreement among competing firms to collude in order to attain higher profits.
    • In the 1970s, OPEC members successfully colluded to reduce the global production of oil, leading to higher profits for member countries.

  • Duopoly Example

    • Colluding to charge the monopoly price and supplying one half of the market each is the best that the firms could do in this scenario.
    • However, not colluding and charging the marginal cost, which is the non-cooperative outcome, is the only Nash equilibrium of this model.

  • Sources and Determinants of Profit

    • For example, firms can collude and work together to restrict supply to artificially keep prices high.

  • Oligopoly

    • If the two collude they can act as a single monopolist and divide monopoly profits.

  • Market Power

    • An oligopoly may also be a price maker with market power, as firms may be able to collude and control the market price or quantity demanded.

  • Monopolies, Mergers, and Restructuring

    • In the late 19th century, many Americans feared that corporations could raise vast amounts of capital to absorb smaller ones or could combine and collude with other firms to inhibit competition.