Collusion is illegal in most countries; however, some companies can form some form of collusion without making physical contact to negotiate with each other. If the companies all know they are going to collude with each other, they can make public releases to release their price policies, such strategy allows them to send price signals to others and form collusion. If this happens, it is really difficult to explore existing collusion in the market. However, there are several characteristics that determine if it is possible to have collusion in a certain market.
In the markets where it is possible to have collusion. Firstly, the markets need to have homogeneous products. Without homogenous products, there is no point for companies to collude, as the prices are set differently for different products. Secondly, there is a punishing system for cheaters. Without punishment for cheaters, cheaters can easily cheat on other players and make significant losses on other companies. Thirdly, it must be profitable for companies to collude. If it is not profitable, then there is no point for these companies to collude. Fourthly, the number of companies should be relatively small. A large number of companies is not easy for the companies to monitor their partners' behaviors, then it is more difficult to check if other companies are cheating and punish the cheaters. Fifthly, such markets need high entry barriers. If it is profitable and has a low entry barrier, then more companies will enter the market and the existing companies will lose their market power then forming collusion is impossible.
Based on these characteristics, to find a market which possibly has a collusion, we need to find the market price is stable and gradually increases at the most time but once experiences a price decrease, the market price will be very volatile and drop rapidly, this is because of the punish system in the market.
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