Which of the following industrial characteristics makes a collusion difficult but leads to competition?
A) Existence of few firms in the industry
B) Existence of an industry price leader
C) Lack of market commonality
D) High barriers of entry

Question

Which of the following industrial characteristics makes a collusion difficult but leads to competition? 
A) Existence of few firms in the industry 
B) Existence of an industry price leader 
C) Lack of market commonality 
D) High barriers of entry

Quizplus · Accepted Answer

Lack of market commonality means that firms in the industry produce different goods or services or target different markets, which reduces the incentive to collude as they are not direct competitors. However, this also leads to competition as each firm tries to capture the market share in their respective markets. The existence of few firms in the industry (A) and high barriers of entry (D) make collusion more likely as there are fewer players to coordinate and the barrier to entry makes it difficult for new firms to enter and compete. The existence of an industry price leader (B) can also make collusion easier as firms can follow the leader's pricing strategy, but it does not necessarily lead to competition.

Which of the Following Industrial Characteristics Makes a Collusion Difficult