Theories of oligopoly - collusive
We saw in competitive oligopoly that firms can never be entirely sure as to how their competitors will react to any given marketing strategy. To overcome this uncertainty, firms may adopt a policy of reducing, or even eliminating, it by some form of central co-ordination, co-operation or collusion. Such collusion may occur where firms attempt to maximise their joint profits, by reaching agreement on their price, output and other policies, or where firms seek to prevent the entry of new firms into the industry so as to protect their longer run profits.
