Collusion in Party Planning Industry
What are the factors that can aid or impede Nola and Charles in colluding to raise party planning prices?
a. A party planning school opens and the new graduates are ready to plan.
b. Charles and Nola both charge a fixed price per person for a party.
c. Charles develops a signature appetizer that becomes the must-have appetizer in Trident.
d. Nola lowers her price on national television.
e. Nola and Charles are regulars at the same coffee house. They talk regularly.
f. Nola's marginal cost is lower than Charles's.
g. Most of the parties are given by Trident's largest employer, a water bottling plant.
Solution:
In the party planning industry, collusion refers to agreements among sellers to elevate prices and reduce output. Let's classify the scenarios based on whether they aid or impede Nola and Charles in colluding.
Collusion refers to mixtures, conspiracies, or agreements amongst sellers to elevate prices and reduce output to increase profitability. Unlike a cartel, collusion does not always require a formal agreement between individuals.
Factors that Aid Collusion:
- Nola and Charles are regulars at the same coffee house. They talk regularly.
- Charles and Nola both charge a fixed price per person for a party.
Factors that Impede Collusion:
- Nola lowers her price on national television.
- Nola's marginal cost is lower than Charles's.
- Most of the parties are given by Trident's largest employer, a water bottling plant.
- A party planning school opens and the new graduates are ready to plan.
- Charles develops a signature appetizer that becomes the must-have in Trident.
These factors can either help or hinder Nola and Charles in colluding to raise party planning prices. It's essential for them to navigate these obstacles carefully to achieve their desired outcome.