Collusion
Definition. Collusion is an agreement, whether formal or tacit, among firms in an oligopoly to coordinate their behaviour rather than compete, typically by fixing prices or restricting output to raise joint profits. It allows the firms to act collectively like a monopoly and capture supernormal profit.
Formal collusion such as a cartel is illegal in most jurisdictions. Tacit collusion, where firms follow a price leader without explicit agreement, is harder to detect and prove.
This term belongs to Oligopoly in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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