Oligopolies and free markets

It\’s often difficult to tell which is which, for the behaviour of firms in either will often be the same.

The Cartel Office found no evidence of deliberate collusion but said the companies were quickly following each other in raising prices above the level they should be.

Everyone raising their prices at the same time would be what you would indeed expect from an oligopoly.

But it\’s also what you would expect in a completely free market. So the evidence that everyone is moving prices in concert doesn\’t actually tell you that they are acting in concert.

5 thoughts on “Oligopolies and free markets”

  1. “above the level they should be”

    That is a very strange statement to make… Who sets the level at which prices should be?

  2. Emil

    I agree. Our prices are the highest we can get away with without making our customers unhappy.

    That is what is a fair price for our company’s services.

    I don’t understand how anybody else can decide what our prices should be???? Do they know our internal costs, our quality philosophy, how we differentiate, our marketing strategy, where, why and how we are investing ??

  3. Well it’s someone easier in commodities than other markets, no? If every time the oil price rises by X% the oil part of the pump price rises by X+10%, then presumably you have grounds for suspicion

  4. It never ceases to amaze me that people believe petrol at £2 (or pick your price) a liter is wicked if the money winds up in the private sector, but somehow magically becomes virtuous if the money winds up in the government sector.

  5. matthew2, you can only have grounds of suspicion if you believe that there is such a thing as a ‘fair price’. There most certainly is not.

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