Collusion is when companies jointly set high prices, rather than compete for another company’s customers by setting low prices. Suppose a gasoline station raises its price, not because its cost is higher, but only because it wants to extract more revenue from consumers. If the other station across the street chooses to match that price, rather than charge a lower price and gain more sales, those two gasoline stations are colluding. They are working together to earn higher profit, rather than working independently, to attract more customers.

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