In the market for bank credit, a large bank sometimes announces a change in interest rates. After the changes in interest rates are announced, other banks in the industry usually react by changing their rates in the same way. This is an example of:

Question

Quizplus · Accepted Answer

This scenario describes implicit collusion, where banks independently follow a leader's pricing changes without explicit agreement, to maintain competitive parity.

In the Market for Bank Credit, a Large Bank Sometimes