Firm conduct is a subject that becomes interesting only when competition is in perfect. Under competition, a firm can sell all it wishes at the market price, but only at the market price. In such circumstances, a firm has no incentive to advertise, to react to what rivals do, or to attempt to discourage entry. Firms in a competitive market with free and easy entry have an incentive to collude, but any such attempt is doomed to failure. Even if all off the many small firms in a competitive industry could coordinate a cartel, new firms would come into the market. This situation is different when competition is imperfect.
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