Tacit Collusion: Cooperation to Reduce Competition

Nike, one of the oligopolistic firms in the sports-wear industry has managed to conspire with Adidas to reduce the risks attached to competition more so in price competition. The company arrived at this common policy with Adidas without formal agreement to control prices in trainers (Duane et al. 2008). This agreement has ensured that when Nike raises or lowers prices of its merchandise other players in the industry will follow hence showing an evidence of the company being a price leader in Trainers. Tacit collusion is illegal in most countries but in counties like UK, Nike employs it so as to: get around the normal supply and demand of commodities, not to engage in price cutting, and not to engage in excess advertisement or other forms of competition.

Reference:

Duane, R., I., Hoskisson, R., E. & Hitt, A., M. (2008). Understanding Business Strategy: Concepts and Cases. Ohio: Cengage Learning. Pp. 173-176