Next week, I am teaching collusive agreements in my price theory class. I decided to take a different approach to the discussion than the one usually found in textbook. The approach consists in showing how economic thought on a topic has evolved over time. For collusion, I decided to discuss George Stigler’s 1964 article on the theory of oligopoly published in the Journal of Political Economy.
Simply put, Stigler proposes a simple approach for stating how collusive agreements can break apart by asking how much extra sales a firm can obtain by cutting its prices without being detected by other firms. Stigler argued that detection got easier as the number of buyers increased or as concentration increased. He also argued that detection became harder if buyers do not repeat purchases and if there is growth in the market through the addition of new customers as firms are not able to…
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Utopia, you are standing in it! 
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