Firms engage in explicit collusion when:
A) they predict what the other will do and attempt to undercut them.
B) they collude without communicating, sustaining a price above the noncooperative price that would arise in a single competitive interaction.
C) they communicate to reach an agreement about the prices they will charge.
D) they communicate what type of good they will produce.

Question

Quizplus · Accepted Answer

Explicit collusion occurs when firms communicate and reach an agreement about the prices they will charge. This is in contrast to tacit collusion, where firms sustain a price above the noncooperative price without formally communicating with each other. So options A and B are incorrect. Option D is irrelevant as the question is about price collusion, not product type.

Firms Engage in Explicit Collusion When