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Game Theory meets Monopolistic Competition: Nail Technicians raise prices together!

Graham Watson

7th April 2024

This is a fascinating article about how nail technicians are responding to the rising cost of living by collaborating to increase the price that they charge. Many of them appear to be earning under the minimum wage.

However, and this is something that I'm genuinely very, very interested by, does this contravene competition law? In other sectors of industry when a group of workers or firms collude in this fashion, I'd expect it to be deemed anti-competitive.

There's also a lovely example of a nail technician revealing that she doesn't understand why game theory might contradict her view that "“It’s really beneficial that we are all raising our prices the same day and you know no-one is going to undercut each other." Really? I think that you might find that someone in the sector will be incentivised to lower their price.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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