Short Feedback / Analysis of both the statements on PRICE SETTING-

PRICE-SETTING- 1. It is not fair to say that the firms are engaged in price collusion if they are all charging the same price. The industry that these firms are in might be in perfect competition, which creates the firms to be "price takers"(Ragan, 2019). The companies essentially have very little, or no market power. Therefore, their pricing will be very similar, if not the same. The price for that market is determined by the demand for that market, then the price is set for all firms no matter their supply. Also, if you have a cartel that is attempting to function as a monopoly, and all firms in the industry are part of this cartel, and not a single one is trying to cheat by producing more output, then you will also see these firms have similar pricing (Ragan, 2019). Another explanation for similar pricing is that all of the companies are currently using the same technology for production, therefore they have the same production costs. If you have no firms advancing their production efforts to lower output costs, you won't see too much variation in price. Or if there is no surplus created in that industry, then you may only see firms offer the product at the price people are willing to pay versus offering an alternate price for the surplus. One other reason for all companies to offer the same price within one industry is if there truly is no way to segment the consumers into categories that could have different pricing. The statement of collusion could be plausible in a scenario where there is competition that has the ability to affect the price through their market power, yet still, every company is offering the same price. This would be more so evident in an oligopoly market structure This story depicts explicit collusion. The reason why it is explicit collusion is because there was first an agreement between the two large bread suppliers to increase their price alongside each other. Then, those two companies met with the retailers to fill them in on the plan and have them increase their retail price to accommodate the wholesale price increase. According to the article, the investigation was still ongoing to prove if certain companies were actually guilty of price-fixing. The retailers, could also quite easily fall under the category of tactic collusion. They heard that the wholesaler prices were going up, and so they were still looking to maximize profit and would increase their prices accordingly to do so. Or if they saw one retailer increase their price, the others may claim to have followed suit to again maximize their profits. 2. Since price-taking firms compete in a perfectly competitive market, it is unfair to say that simply because all the firms prices are equal that they are committing collusion. There are many different reason as to why the price would be similar, if not the same in these kinds of industries. The first reason being that all the products are homogeneous, meaning that all the products are the same to other firms (ex: the wheat industry). The prices would remain the same since you can't reasonably ask consumers to pay a higher price for a product that another firm is selling at a lower price and not expect to lose consumers.Since there are many sellers in a perfectly competitive market, every individual firm has little to no market power over the prices at which they charge. For a firm to be a price-taker, the number of firms in the industry must be large enough so that no one can exert any influence on the market price of its product by selling more or less. If one firm decides to increase their prices, and other firms follow they are engaging in tacit collusion.Another reason why the prices would be the same is because all buyers have perfect information, meaning that they know the price at which the goods are sold at and the supply of the market. As a consequence, if any firm raises the price of its product, it is sure to lose its consumers.The firms in the article engaged in explicit collusion, where they were in cooperation with each other. The cooperation among the cartels allows them to restrict output and increase prices, thereby increasing the members' profits.