It is often observed that the prices charged for gasoline by the vario

It is often observed that the prices charged for gasoline by the various gas stations in a particular city tend to move together very closely. Is this an example of tacit collusion that should be prosecuted in the United States? Why or why not?

What will be an ideal response?

ANSWER

Many people want to argue that the observed movements of gasoline prices are evidence that gas stations are colluding with one another, at least tacitly. This, however, ignores the fact that there is generally a large number of competing gas stations, especially in medium and larger size cities. It is more likely the case that the significant amount of competition among gas stations is what is forcing the prices to move together. As such, it would be fairly difficult, if not impossible, to successfully bring charges of tacit collusion against these firms.