Collusion

The act of cooperating with rivals in order to "rig" a situation.

They are called Cartel when they colluded.

Tip

This is often banned by Antitrust Laws to prevent Oligopoly growing into a Monopoly.

Note

Firms in a colluding oligopoly act as a monopoly and share the profit.

An example of a colluding oligoloy would be:

This graph illustrates profit maximization for a colluding oligopoly, where firms act as a monopoly by producing at output level Q0 (Profit Maximizing Rule) and charging price P0 to maximize joint profits, despite the inherent incentive for individual firms to cheat and expand output.

What if they did not collude?
They will be producing at Marginal Cost (MC)=Demand.