how does price fixing work, can’t anyone charge whatever they want for a product?
In: 82
Price fixing is when separate companies all agree to artificially inflate prices instead of competing.
Say there were 3 gas stations in town, and the owners agreed to keep gas level at $5/gal even when the price they pay for gas falls from $4.50/gal to only $3.50/gal. If the normal mark-up is about 50 cents a gallon, their agreement nets them an extra $1/gal. Price fixing works on goods that have inelastic demand — people need gas to get to work, drive kids to school, etc. no matter the cost. It also works most effectively with commodity goods — a turkey sandwich from Subway is very different from one at the French cafe.
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