The cost of second-hand cars, flights, live music events and computer games kept the inflation rate higher than expected, despite the drop in petrol prices.
Yeah, externalities create opportunities for coordinated price behaviour. It’s implicit price fixing in a way that would be illegally anti-competitive if made explicit. The CEO of EE/tesco/next or whoever can just go “due to input costs we are forced to pass on price increases to consumers” and all their peer companies can safely bump up prices, knowing that they aren’t going to undercut them on price. The companies all get higher margins and the consumer gets screwed. Without the externality they’d have no idea about the pricing strategy of peers and would have to price competitively to retain or grown market share.
Yeah, externalities create opportunities for coordinated price behaviour. It’s implicit price fixing in a way that would be illegally anti-competitive if made explicit. The CEO of EE/tesco/next or whoever can just go “due to input costs we are forced to pass on price increases to consumers” and all their peer companies can safely bump up prices, knowing that they aren’t going to undercut them on price. The companies all get higher margins and the consumer gets screwed. Without the externality they’d have no idea about the pricing strategy of peers and would have to price competitively to retain or grown market share.