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Homework answers / question archive / Explain why petrol stations across the street from each other with large signs displaying their prices may "legally" jointly set monopoly prices
Explain why petrol stations across the street from each other with large signs displaying their prices may "legally" jointly set monopoly prices.
The price display implies that each firm can access their competitors' prices, set the monopoly prices, and write off the explicit agreement. However, to ensure that they earn equal market share, the firms tend to agree on a specific market price. Setting higher gasoline prices will force more customers to purchase products from your competitors. Generally, these firms collude to set higher prices for their products to obtain hefty profits from their consumers. This method is referred to as the tactic collusion.