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Article 2: Alleged price fixing by liquor companies - Coggle Diagram
Article 2: Alleged price fixing by liquor companies
Problem
Few firms dominate the market leading incentivizing firms to collude leading to price fixing.
Intro
Liquor companies have been raided for suspected price fixing on country liquor in India.
Evaluation
Presence of sticky prices due to heavy regulation and low competition.
Interdependence prevents raising of prices which would lead to a decline in demand. Lowering prices can also spark a price war which might not earn any market share or revenue.
Likely informal collusion given the how heavily regulated the industry is.
Prices have been increased due to price leadership
Collusive oligopoly
Firms in an oligopoly can choose to be compete through price or non-price competition. However the liquor companies are colluding hence it is a collusive oligopoly.
Factors
Similar costs
No scope for innovation
Consumer inertia
Seizure of company documents and computer hardware could also indicate that there was potentially also formal collusion.
Conclusion
Potential solutions
Higher fines
Monitoring data