Tag: collusion

King of the Hill – Ilegal Propane Cartel

In this clip from King of the Hill, local propane sellers had engaged in a price war that drove prices so low that they were incurring losses. Frustrated by the unsustainable competition, Hank Hill brings the producers together to encourage them to “work together” and charge more reasonable prices. What starts as an attempt to stabilize the market quickly becomes an illegal propane cartel, resulting in higher prices and larger profits for the few remaining sellers.

The scene shows how firms may be tempted to coordinate prices to avoid losses, even though such agreements harm consumers and violate antitrust laws.

Thanks to Brian Lynch for the clip recommendation

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Hobby Lobby – Christmas Competition

The holiday commercial illustrates key economic concepts through the story of two young entrepreneurs competing to sell hot chocolate. Initially, both firms engage in product differentiation by progressively increasing their decorations to attract customers. This competition raises their average costs above what would be necessary in a more competitive market.

The ending of the commercial takes a surprising turn: instead of continuing the costly competition, one firm pivots to selling a complementary product (marshmallows). This demonstrates the potential power of collusion or cooperation, where firms can align their strategies to raise overall profits, behaving more like a monopolist rather than competing solely on price.

Thanks to Patrick Johnson for the clip submission!

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The National — Bread Collusion in Canada

Over the past 15 years bakers in Canada have been colluding to raise the price of bread across many of Canada’s major retailers. The retailers (allegedly) agreed to the price increase so long as the others in the group also maintained the high prices. While some of the retailers are denying the claim, Canada’s Competition Bureau is developing a case to expose the participants.

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I Love Lucy — 5 Cent Hamburgers

 

Price wars aren’t good for business profits, which is why many firms may want to collude. If two goods are close substitutes, prices should be driven down near the marginal cost of production. This is a good introduction to the long run outcome of perfect competition, but can also be used to show the shut down rule. When prices drop too low, it may be worth some firms to stop production.

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