Question

While a number of industry attributes have an effect on the level of opportunity for tacit collusion in an industry, none is more important than ________.

Answer 1

The answer is the level of concentration in the industry. When there are a small number of firms in an industry, it is easier for them to coordinate their behavior and engage in tacit collusion. This is because there are fewer firms to coordinate with and because the costs of coordinating and maintaining the collusion are lower. In contrast, in industries with a high level of fragmentation or with a large number of firms, it may be more difficult for firms to coordinate their behavior and engage in collusion.