Firm A indirectly coordinates a limit on price increases on its products that compete with Firm B's products. Firm A is engaging in:
A)Tacit collusion.
B)Explicit collusion.
C) A prisoner's dilemma.
D) A prisoner's dilemma

Question

Firm A indirectly coordinates a limit on price increases on its products that compete with Firm B's products. Firm A is engaging in:
A)​Tacit collusion.
B)​Explicit collusion.
C) ​A prisoner's dilemma.
D) ​A prisoner's dilemma

Quizplus · Accepted Answer

Tacit collusion occurs when firms indirectly coordinate their actions without any explicit agreement, and this is what Firm A is doing by limiting price increases on products that compete with Firm B. Explicit collusion, on the other hand, requires an explicit agreement, which is not present in this scenario. A prisoner's dilemma is a situation in which both firms have an incentive to cheat, but engaging in strategic behavior can lead to mutually undesirable outcomes. This may be a factor in this scenario, but it is not the best choice as the specific actions of the firms are not described in enough detail to definitively conclude that a prisoner's dilemma is occurring. The last option, "A prisoner's dilemma," is a duplicate answer option and does not provide a meaningful choice.

Firm a Indirectly Coordinates a Limit on Price Increases on Its