Because buyers have the heterogeneity of purchase commitments – heterogeneous transactions.
- The size of purchase (i.e. different costs)
- The urgency of purchase (i.e. different elasticity of demand)
Colluding firms can maximize industry profits by employing a price structure that takes account of the differences in the costs of various transaction – joint determination of outputs and prices.
The levels of collusive prices depend on the conditions of entry into the industry and the elasticity of demand.