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.
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.
Andre is upset with a competing doctor decides to start operating on feet (toebesity) because they had originally agreed to split the bottom in half. Removing competition for plastic surgery meant that each could charge higher prices for their services.