large steel company announces that it is raising its price for a specific
quality of steel, other steel producers will often announce similar price
increases within a day or two. Or when one Canadian bank announces an
increase in its interest rate for five-year mortgages, other banks usually
increase their rates within a few days. These seemingly coordinated
actions may be the result of a secret explicit agreement or of tacit
collusion. However, the firms that followed the first firm’s price or
interest rate increase could easily argue (and usually do in such cases)
that with their competitor raising prices, and thereby driving some
customers toward them, the natural response is to raise their own prices.
rishikesh
(rishikesh)
#1