Which of the Following Explains Why Two Firms, Apex and Bongo

question 87

Multiple Choice

Which of the following explains why two firms, Apex and Bongo, would engage in implicit collusion, rather than explicit collusion?

• A) Implicit collusion allows Apex to increase its profits at the expense of Bongo without Bongo knowing that collusion has occurred; if Apex engages in explicit collusion, Bongo will realize collusion has taken place and retaliate against Apex.
• B) Implicit collusion is less costly to both firms than explicit collusion; therefore, profits will be greater for both firms if they engage in implicit collusion.
• C) explicit collusion is illegal; if the managers of Apex and Bongo engage in implicit collusion they may be within the law.
• D) Implicit collusion always has an enforcement mechanism that forces both firms to collude; explicit collusion does not have an enforcement mechanism.

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Definitions:

Dynamic Pricing

A pricing strategy where prices are adjusted in real time based on market demand, supply conditions, and other factors.

Prices Based

Refers to a pricing strategy determined by factors such as cost of production, competition, and perceived value by the consumer, often adjusted to market conditions.

Odd Pricing

A pricing strategy where items are priced slightly below a round number (e.g., $199.99 instead of $200), believing it psychologically encourages more sales.

Yield Management

A strategy for maximizing revenue even when a firm has a fixed amount of something (goods, services, or capacity).