However, the question is much more complex. First of all, collusion
without explicit agreements is not easy to achieve. Each supplier might
have different views on the level of prices which the demand would
sustain, or might have different price preferences according to its
cost conditions and market share. A company might think it has certain
advantages which its competitors do not have, and would perhaps
perceive a conflict between maximising its own profits and maximizing
industry profits.
Moreover, if collusive strategies are implemented, and oligopolists
manage to raise prices significantly above their competitive level,
each oligopolist will be confronted with a conflict between sticking to
the tacitly agreed behaviour and increasing its individual profits by
'cheating' on its competitors. Therefore, the question of mutual
monitoring and control is a key issue in collusive oligopolies."
Monopolies and oligopolies, went the contestability theory, also
refrain from restricting output, lest their market share be snatched by
new entrants. In other words, even monopolists behave as though their
market was fully competitive, their production and pricing decisions
and actions constrained by the "ghosts" of potential and threatening
newcomers.
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