Collusion

AAA

DEFINITION of 'Collusion'

A non-competitive agreement between rivals that attempts to disrupt the market's equilibrium. By collaborating with each other, rival firms look to alter the price of a good to their advantage. The parties may collectively choose to restrict the supply of a good, and/or agree to increase its price in order to maximize profits. Groups may also collude by sharing private information, allowing them to benefit from insider knowledge.

INVESTOPEDIA EXPLAINS 'Collusion'

Collusion involves people cooperating or working together when they should be competing. In the stock market, collusion can take many forms. Traders participating in accommodation trading, where goods are exchanged for non-competitive prices, are involved in collusion.
Colluding traders might share private information regarding upcoming takeovers, allowing them to benefit from insider trading. Price rigging also involves the collusion of sellers, who inflate the price of an asset to realize higher profits.

RELATED TERMS
  1. Basing Point Pricing System

    A pricing system in which the buyer pays a base price plus a ...
  2. Supply

    A fundamental economic concept that describes the total amount ...
  3. Price Rigging

    An illegal action performed by a group of conspiring businesses ...
  4. Basing Point

    A specific location used in the basing point pricing system. ...
  5. Cartel

    An organization created from a formal agreement between a group ...
  6. Equilibrium

    The state in which market supply and demand balance each other ...
Related Articles
  1. Markets

    What Investors Can Learn From Insider ...

  2. Economics

    Defining Illegal Insider Trading

  3. Economics

    The Pitfalls Of Financial Regulation

  4. Nearly all IPOs have some sort of lock-up period
    Investing Basics

    IPO Lock-Ups Stop Insider Selling

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center