Oligopolistic industries may be sorely tempted to engage in collusion to boost profits and to generally make their life easier.  The previous web article shows two cases in point.

The present article raises the question of whether collusion, or some milder form of price coordination, tends to follow a life cycle pattern.  New oligopolies seem often to compete aggressively on price.  But as time, and bitter experience, goes on,  the firms may find a way to avoid the independent behavior that makes life uncomfortable in oligopoly.
 

The airlines case discussed on the last page is a good one to consider.  Airlines were deregulated in 1979, and the industry went from one where entrance was closed and prices were controlled by the government, to one where airlines could enter from the outside and existing ones could start new routes, at whatever price they chose.  It was a whole new world and a sequence of events began to unfold.  First a whole bunch of new airlines were formed, and existing ones expanded into new geographical markets.  Prices plummeted.  Firms competed aggressively on price.   Each firm took an approach of  "rugged individualism".  They were going to slug it out in the belief that they had what it took to survive.  What actually happened was a bloodbath.  Dozens of airlines failed or were bought up by others after they had hit hard times.

The  Crandall and Putnam conversation took place in the early 1980’s, during the midst of the battle.  It is interesting to note that Putnam rejected Crandall’s plea for cooperation.  Not only did he reject it, he recorded the conversation and eventually turned it over to the Feds.   Putnam was possibly not yet ready to consider cooperation (or was maybe just a "straight arrow").  By the 1990s Braniff  and many other airlines had disappeared, and the tendency toward aggressive price behavior among airlines was moderating.  Is it possible that the firms learned their lesson, and such offers as described in the case came to be accepted?  Alternatively,  the CEOs and other chiefs may just have begun to adopt a "live and let live" approach.  Price leadership is the name for one angle on the live and let live philosophy.   It is where one firm comes to be recognized at the price leader, and the others just follow the leader.  This is not, usually, based on an actual agreement, but it just starts to happen – possibly after price warfare has shown that everyone may be a loser.  If there is no getting together to reach an agreement, their is no violation of the law, and firms need not fear antitrust prosecution.  Of course, with nothing more than a "monkey see,  monkey do" pattern to keep prices coordinated, the arrangements can easily break down.  New executive, new firms entering, or major changes like mergers or technological change may upset the game plan and signal a reversion to independent behavior.   Life is not easy in oligopoly.

Question for Consideration or Discussion:  The long distance phone business may be going through a life cycle pattern too.  In recent years, with the advent of the competition of MCI and others against AT&T, a bitter struggle has been going on.  What do you think the future will bring?