Quote:
Originally Posted by QuantumIguana
You have it backwards. Collusion only makes sense with products that are non-fungible. Consider the example of a highly fungible commodity like corn. No one really cares what bushel of corn they have, just so long as they have their bushel of corn. If someone colluded to keep the price of their corn artificially high, this collusion would fail, as people would simply be able to buy identical bushels of corn at a cheaper price from some other supplier.
Books are clearly not fungible. Any bushel of corn is interchangeable with any other bushel of corn, but books are not interchangeable with just any random book. People don't pay more than they have to for a fungible product. Despite the availability of free or 99 cent books, the book market is dominated by books that cost more. People won't just read any old book, a fine wine is not interchangeable with a bottle of Ripple, a Van Gogh is not interchangeable with just any painting.
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Let us consider the Twlight novels. Their price is largely determined by their publisher, Little Brown. If Brown wants to raise prices, and the books are not fungible, then they can do so with impunity, as the product is not interchangeable with any other. No collusion with other publishers is necessary. You must pay what Brown asks to obtain a Twilight book.
However, one cannot just raise the price of something like gasoline, which is fungible. Consumers will just buy a cheaper brand, as you pointed out. Thus companies collude to raise prices as a group, giving consumers no alternative but to pay more, regardless of which brand they buy.