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TACIT COLLUSION: Seemingly independent, but parallel actions among competing firms (mostly oligopolistic firms) in an industry that achieve higher prices and profits, much as if guided by an explicit collusion agreement. Also termed implicit collusion, the distinguishing feature of tacit collusion is the lack of any explicit agreement. They key is that each firm seems to be acting independently, perhaps each responding to the same market conditions, but the end result is the same as an explicit agreement. This should be contrasted with explicit or overt collusion that does involve a formal, explicit agreement.
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Lesson 20: Oligopoly | Unit 4: Analysis
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Page: 19 of 24
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- A handy way to analyze this type of market interdependence is through game theory.
- Game theory is an analysis that illustrates how the choices between two players affect the outcomes of a "game."
- Assume the market has only two firms, OmniCola and Juice-Up.
- Each is thinking about spending $50 million on advertising.
- This table presents alternative outcomes for different advertising choices by OmniCola and Juice-Up:
- If OmniCola and Juice-Up BOTH decide to advertising, then each receives $200 million in profit.
- However, if NEITHER OmniCola or Juice-Up decide to advertising, then each receives $250 million in profit.
- Alternatively, if OmniCola advertises but Juice-Up does not, then OmniCola receives $350 million in profit and Juice-Up receives only $100 in profit.
- But, if Juice-Up advertises and OmniCola does not, then Juice-Up receives $350 million in profit and OmniCola receives only $100 in profit.
- What to do?
- The end result is that both firms decide to advertise.
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BANK LIABILITIES What a bank owes, including most notably customer deposits. Bank liabilities are typically listed on the right-hand side of a bank's balance sheet. Bank assets, what a bank owns, are listed on the left-hand side of a bank's balance sheet. Net worth is the difference between assets and liabilities. The most important liability category of most bank is checkable deposits, which is part of the economy's M1 money supply. The largest liability category includes other types of deposits (especially savings deposits, certificates of deposit, and money market deposits) that enter into the M2 and M3 monetary aggregates.
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BLACK DISMALAPOD
[What's This?]
Today, you are likely to spend a great deal of time flipping through mail order catalogs trying to buy either 500 feet of coaxial cable or a coffee cup commemorating the 1960 Presidential election. Be on the lookout for telephone calls from former employers.
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The first U.S. fire insurance company was established by Benjamin Franklin in 1752 in Philadelphia.
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"All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence. " -- Martin Luther King Jr., civil rights leader
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IRT
International Trade Commission
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