Definition of collusion
collusion (plural collusions)
- A secret agreement for an illegal purpose; conspiracy.
Collusion is an agreement, usually secretive, which occurs between two or more persons to limit open competition by deceiving, misleading, or defrauding others of their legal rights, or to obtain an objective forbidden by law typically by defrauding or gaining an unfair advantage. It is an agreement among firms to divide the market, set prices, or limit production.  It can involve "wage fixing, kickbacks, or misrepresenting the independence of the relationship between the colluding parties." All acts affected by collusion are considered void.
In the study of economics and market competition, collusion takes place within an industry when rival companies cooperate for their mutual benefit. Collusion most often takes place within the market structure of oligopoly, where the decision of a few firms to collude can significantly impact the market as a whole. Cartels are a special case of explicit collusion. Collusion which is not overt, on the other hand, is known as tacit collusion. Cartel mergers are profitable. For example, there are three firms in a market which behave as a cartel, if all firms collude to act as a single firm, the merger will be profitable in oligopolistic industries. It will ensure the firm will gain an economic profit and will eventually drive off the weaker firm and the price benefit will go to consumers (or will continue to be absorbed as profit by the firm).
- Sullivan, arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 171. ISBN 0-13-063085-3.
- Collusion Law & Legal Definition 
- Collusion. Archived 2009-10-31.
- Wiktionary. Published under the Creative Commons Attribution/Share-Alike License.