One commonly employed competitive strategy is precisely to avoid competing. There are both legal and illegal ways to do this. That the intensity of competition truly varies by industry could not be more vividly demonstrated than through outright secret price collusion by global consumer goods firms, not entirely unknown for the practice (see related articles below). Even without explicit price coordination, such firms often engage in (legal) tacit price collusion by dint of their oligopolistic position.
1. What are some of the suspicious symptoms of price fixing in a given industry? From what you have read or heard, how common is price fixing? How do firms usually coordinate prices? To what extent is collusion tacit and to what extent is it based on explicit secret deal making?
2. What evidence is there for price fixing in the soap business? Based on the facts mentioned in the article, how well did the price-fixing system work? How long did the system hold up?
3. Price fixing agreements are often hard to maintain indefinitely because of the temptation for one firm to defect. Why do you suppose that soap makers would have been especially motivated to coordinate prices? Speculatively speaking, what factors may have facilitated a special bond among the largest industry players?
4. Suppose you had just been hired by one of these firms and sent on one of these covert price-fixing assignments. What would you have done? Independently of this, what is actually the right thing to do as a manager dispatched on a covert price-fixing assignment?
Dirty Secrets In Soap Prices
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