Remember this, firms are only likely to collude in certain market environments.

Brozen and Posner suggest the following pre-conditions to collusion
- market concentration on the supply side;
- no fringe of small sellers;
- high transport costs from neighbouring markets;
- small variations in production costs between firms;
- readily available information on prices;
- inelastic demand at the competitive price;
- low pre-collusion industry profits;
- long lags on new entry;
- many buyers (otherwise selective discounting to big buyers will be too tempting while monitoring adherence to the agreement will be difficult);
- no significant product differentiation;
- large suppliers selling at the same level in the distribution chain;
- a simple price, credit and distribution structure;
- price competition is more important than other forms of competition;
- demand is static or declining over time; and
- stagnant technological innovation and product redesign.
Stable collusive arrangements are thus likely to be rare; the absence of any of the conditions will tend to undermine the potential for successful collusion.
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