Editing Oligopoly (section)

=== Collusion and price cutting ===
In a market with low entry barriers, price collusion between established sellers makes new sellers vulnerable to undercutting. Recognising this vulnerability, established sellers will reach a tacit understanding to raise entry barriers to prevent new companies from entering the market. Even if this requires cutting prices, all companies benefit because they reduce the risk of loss created by new competition.<ref>Explicit vs. tacit collusion—The impact of communication in oligopoly experiments</ref> In other words, firms will lose less for deviation{{Clarify|reason=wikilink or wiktionary?|date=July 2023}} and thus have more incentive to undercut collusion prices when more join the market. The rate at which firms interact with one another will also affect the incentives for undercutting other firms; short-term rewards for undercutting competitors are short lived where interaction is frequent, as a degree of punishment can expected swiftly by other firms, but longer-lived where interaction is infrequent.<ref name=":0">Ivaldi, M., Jullien, B., Rey, P., Seabright, P., & Tirole, J. (2003). The economics of tacit collusion.</ref> Greater market transparency, for instance, would decrease collusion, as oligopolistic companies expect retaliation sooner where changes in their prices and quantity of sales are clear to their rivals.<ref name=":0" />