Firms engage in tacit 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

Tacit collusion occurs when firms sustain a price above the noncooperative price without communicating or explicitly agreeing to do so. This can happen through various means such as price leadership, parallel pricing, or conscious avoidance of price competition. Therefore, option B is the correct answer as it accurately describes the nature of tacit collusion.

Firms Engage in Tacit Collusion When