I heard someone on the radio complain that gas companies were "colluding?" Is it correct that gas is a commodity, and collusion would be impossible since commodities are undifferentiated goods whose prices are set by the market?
2007-08-27 17:44:00 · 2 answers · asked by Anonymous in Social Science ➔ Economics
OPEC is a producer cartel that agrees to production limits to control the price of oil. Whether of not US companies also collude, you can not argue that the price is set by a free market. Being a commodity does not mean there cannot be monopoly power in the market.
2007-08-27 19:26:50 · answer #1 · answered by meg 7 · 0⤊ 0⤋
Their prices are set by supply and demand. Collusion could happen as a result of petroleum suppliers agreeing to shut down refineries for "maintenance" or other reasons, thus reducing supply.
Something similar happened in California. Electric power is a commodity, but Enron and other power companies conspired together to increase costs by, among other things, creating phantom congestion on grids.
2007-08-28 00:54:38 · answer #2 · answered by Anonymous · 0⤊ 0⤋