Vendor dilemma

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The supplier dilemma is a social dilemma between competing suppliers of goods in connection with price fixing .

It is assumed here that a provider will lose many of its customers to the competitor as soon as it increases its prices. So that would put him at a disadvantage.

If, on the other hand, the providers both increased their prices at the same time, both would only lose a few customers, namely those who forego consumption due to the increased prices . However, no customers would switch to the competition. A price agreement between the providers could therefore in principle bring them monopoly prices .