A price and quantity fixing agreement is known as a collusion. Collusion is an illegal agreement between two or more parties to deceive or defraud a third party, often involving price fixing or market manipulations. It is a form of anti-competitive behavior that can harm consumers and lead to market inefficiencies.
In a collusion agreement, businesses agree to limit the amount of goods or services they produce or sell and fix the prices at which they sell them. This results in an artificial shortage of goods or services, which allows the colluding parties to charge higher prices and increase their profits at the expense of consumers.
Collusion can occur in many industries, including the pharmaceutical, banking, and energy sectors. The most common form of collusion is price fixing, where businesses set prices for their products or services in a way that is mutually beneficial. This can lead to higher prices for consumers, as well as reduced competition in the marketplace.
The consequences of collusion can be severe. Collusion leads to higher prices, reduced supply, and loss of competition, which harms consumers. Additionally, collusions are illegal and can result in significant fines and even imprisonment for the parties involved.
To avoid collusion, businesses should conduct themselves in a transparent and competitive manner. They should avoid engaging in secret agreements with competitors and should always be mindful of how their pricing and supply strategies impact the broader market.
In conclusion, a price and quantity fixing agreement is known as a collusion. It is an illegal agreement between two or more parties to limit production or supply and fix prices, leading to market inefficiencies and harm to consumers. Businesses should avoid collusions and engage in transparent and competitive practices to promote fair competition and consumer welfare.