Argos and Littlewoods Price Fixing Arrangement
The oligopolistic features of the toy market are that there are two dominant retailers that dominate the market. There is a significance of advertising, such as them trying to dominant the price of their products. Lastly, there are no barriers to entry. These two firms have cost advantages due to the expansion of the company. In a perfectly competitive environment Hasbro, Argos, and Littlewoods wouldn’t have been able to have a price-fixing agreement because everyone would be charging the same price for their products, so they would be losing money in the long run.
There were two bilateral agreements between Hasbro and Argos and Hasbro and Littlewoods, and one trilateral agreement, which enabled the exchange of pricing information between all three companies. The companies’ prices were fixed on selected Hasbro products to Hasbro’s recommended retail prices and introduced certainty in reference to the actions of a rival. The symptoms and tests of collusive behavior are that no two companies should join together to dominate the pricing of their competitors. There is an incentive to cheat just like Hasbro, Argos, and Littlewoods did because of the huge profits and expansion of their companies. However, because the larger companies join together, the smaller companies end up going out of business due to unfair competition.
There are three conditions within an oligopolistic market structure that make it possible for dominant firms to collude; military, maintaining global competitiveness, and the expansion of new technology. Collusion isn’t cheat proof because there could be other reasons or opportunities for companies to break agreements with each other. If a firm sees a better opportunity to increase revenues, they’re going to take that chance. Three dominant firms came together to reduce the numbers of competitors because they saw an opportunity. The only reason it’s allowed in the U.S. with few...
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