What are the motives of collusion?

1. Profit maximization - Higher profit by exercising (near monopoly) market power 2. Risk management and enhancement of security - Risk arises from changes in consumer tastes and competition between producers - Firms can choose to take independent actions (product differentiation, advertising and marketing) or collude and act jointly 3. Exchange of information - It lowers firms’ vulnerability, encourages cooperative behavior and increases industry stability 4. Unsatisfactory performance - Low profitability due to industry conditions such as intense competition and demand decline can encourage firms to collude