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What is Price Fixing?

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Price fixing is an agreement between competitors that boosts prices. In many cases, it is prohibited by law. Price fixing mechanisms include restricting supply to a set level or a price floor.

Illustrative Example

An airport has five independent retailers that sell water. Each sells the same brand of water at the same price, $7. The average price of the same brand of water outside the airport is $2. Regulators may begin to suspect that some form of collusion has taken place between the sellers. According to competition theory, the price should fall because the first store to drop the price will likely receive a large share of the customers.

Impact

Price fixing is an economic inefficiency that is considered anti-competitive behavior.
Overview: Price Fixing
Type
Price Economics
Business Law
Compliance
Definition
An agreement between competitors that boosts prices.
Mechanisms
Price floor
Fixed price
Supply cap
Mandatory surcharges
Related Concepts

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Price Fixing
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Price War
Revenue Management
Veblen Goods
Price Floor
Price Promotion
Price Sensitivity
Price Skimming
Price Umbrella
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Pricing Strategy
Sticky Prices
Value For Money
More ...
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