Two maritime energy giants, Zephyr Power and Boreas Energy, are the sole pre-qualified developers for offshore wind concession rights in Sector 7 of the North Sea. Following an investigation, the European Competition Network (ECN) fined both firms a total of €120 million for collusive tendering. Evidence revealed that representatives from both companies used encoded channels to coordinate bidding strategies, ensuring they did not bid aggressively against each other, thereby artificially keeping the concession prices paid to the government extremely low.
Draw a simple two-firm, two-outcome game theory payoff matrix to show why Zephyr Power and Boreas Energy had an incentive to collude.
92 exam-style questions on Edexcel A A Level Economics 3.4 Market structures, covering 3.4.1 Efficiency, 3.4.2 Perfect competition, 3.4.3 Monopolistic competition, 3.4.4 Oligopoly, 3.4.5 Monopoly, 3.4.6 Monopsony, and 3.4.7 Contestability. Each one has a worked solution and a mark scheme showing where the marks go.