Definition
Collusion is a secret or illicit agreement between firms or individuals to limit competition, fix prices, control output, or manipulate markets to gain economic advantage.
Why It Matters
Collusion undermines free-market principles, leading to higher prices, reduced consumer choice, and inefficient allocation of resources. Antitrust laws and regulatory oversight aim to detect and prevent collusive practices to maintain competitive markets.
Example
Two competing airlines secretly agree to fix ticket prices on certain routes. As a result, consumers pay more than they would under competitive pricing, and market efficiency is reduced.