An agreement between Nike and Adidas to raise prices of the track shoes that each company produces by 50% is an example of a collusive agreement, and economists generally agree that:

Question

Quizplus · Accepted Answer

Collusive agreements, such as price-fixing agreements, are generally considered harmful to society because it reduces consumer surplus and creates deadweight loss by artificially raising prices above the competitive equilibrium price. The fact that the price increase is significantly above marginal cost supports this argument. Hence, it is not in the best interest of society.

An Agreement Between Nike and Adidas to Raise Prices of the Track