Large number of firms
- Small market share: each firm supplies a small part of the total industry output. Each firms’ price can deviate from others by a relatively small amount.
- Ignore other firms: all the firms are relatively small, no one can control the market. So they do not pay attention to their competitors.
- Collusion impossible: firms in this market would like to make an agreement for a higher price, called collusion. But because there are many firms collusion is not possible.