Why is collusion bad for consumers?

Question

Detail needed to discuss how collusion is in many ways bad for consumers.

Answer 1

Sandro, I'd start by finding out what Collusion is first. Then I'd try to sort out what is (and isn't) good for customers. Then I'd see how Collusion relates those which I identified as good (or bad). I won't define collusion for you due to the virtue of the fact you are asking about. Having price respect the best working economic model (the whole demand and supply dictating price, the whole homoeconomicus thing) is good for consumers in that the true (or absolute if you will) value of goods and services will win out in the absence of Collusion. Here is a proof. What if, instead of fixing the price of a bushel of wheat at $x, they instead fixed it at $3x dollars simply because they wanted to earn more money and simply because they have control over the supply of any and all wheat available? What is they then went to fix it at $4x or $5x or $10x. Do you get the idea? The price they could potentially put on goods will be divorced from scarcity, and cost of providing the goods or services. In a word customers would have no choice but to either be exploited or, in cases where elasticity allows, be without the goods and services.    

I hope this helps