how does price fixing work, can’t anyone charge whatever they want for a product?
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The issue here would be the same as if we allowed monopolies to form.
When we have companies fighting against each other to get customers, they will find ways to improve quality or reduce the price. This way, they will stand out from the competition by having better products or better prices.
Now, imagine a scenario where only 1 company can make a product, this is a monopoly. They will have no incentive to give good prices or to increase qualtity. They have the market and they can increase price at no expense. They also can reduce quality at no expense. There will not be any othet player that will come and take their customers.
Now, if we have multiple companies that offer a product, we know that there isn’t a monopoly. However, if the companies come together to fix the price, they will be setting the price like if they were a monopoly. Meaning they can rise prices as much as makes them most profit and they will never get incentive to reduce them.
The reasons why we have laws against monopolies and against price fixing are very similar on an economic level. In the end, companies that compete against one another will have to make consessions at the expense of their profits, and consumers will gain from lower prices or better quality. Where as companies not competing against one another will not make concessions, this will be at the expense of the customers.
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