The difference between cooperation and collusion
Firms in an oligopoly sometimes work together. Cooperation is legal joint activity. Collusion means secretly agreeing to fix prices or output to harm consumers, which is illegal.
Real World
When Airbus and Boeing jointly lobbied governments for standardised aviation safety rules, that was legal cooperation. When British Airways and Virgin Atlantic secretly coordinated fuel surcharges in 2007, that was illegal collusion — BA was fined £121 million.
Exam Focus
Distinguish cooperation from collusion by legality and consumer impact; examiners penalise conflating the two terms.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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