What does price fixing refer to in a competitive market?

What does price fixing refer to in a competitive market?

• A. Setting prices based solely on company profit
• B. Joint efforts by competitors to establish a fixed price or rate
• C. Individual company decisions on pricing strategy
• D. Establishing a discount pricing model

Answer: (B)

Price fixing refers to the practice where two or more competitors collaborate to set a specific price or price range for their products or services in a market, which is detrimental to fair competition. This collusion can eliminate price competition, leading to higher prices for consumers and reduced market efficiency. In a competitive market, companies typically strive to set prices based on their costs and competition. However, when they engage in price fixing, they are not acting independently, but rather in concert with others, undermining the competitive landscape. This behavior is illegal under antitrust laws in many jurisdictions, including the United States, as it violates principles of free market competition and harms consumers. The other options describe different scenarios: setting prices based solely on company profit refers to unilateral pricing decisions that do not involve collusion; individual company decisions on pricing strategy imply independence in pricing choices; and establishing a discount pricing model does not inherently involve collusion or fixing prices among competitors. Thus, only the joint efforts to establish a fixed price or rate accurately captures the essence of price fixing in a competitive market.

Price fixing refers to the practice where two or more competitors collaborate to set a specific price or price range for their products or services in a market, which is detrimental to fair competition. This collusion can eliminate price competition, leading to higher prices for consumers and reduced market efficiency.

In a competitive market, companies typically strive to set prices based on their costs and competition. However, when they engage in price fixing, they are not acting independently, but rather in concert with others, undermining the competitive landscape. This behavior is illegal under antitrust laws in many jurisdictions, including the United States, as it violates principles of free market competition and harms consumers.

The other options describe different scenarios: setting prices based solely on company profit refers to unilateral pricing decisions that do not involve collusion; individual company decisions on pricing strategy imply independence in pricing choices; and establishing a discount pricing model does not inherently involve collusion or fixing prices among competitors. Thus, only the joint efforts to establish a fixed price or rate accurately captures the essence of price fixing in a competitive market.