What does tacit collusion involve?

Tacit collusion involves unspoken agreements among rivals in an industry where firms coordinate their strategies without direct communication. This form of collusion typically manifests when firms observe each other's actions, such as pricing or output levels, and adjust their own behaviors to maximize mutual benefits, effectively leading to higher prices or reduced output in a manner similar to that of formal collusion.

In tacit collusion, firms rely on an understanding of mutual interdependence and market signals rather than explicit agreements. This allows them to avoid the legal implications of overt collusion while still achieving cooperative outcomes that can limit competition.

Other options describe different concepts: formal agreements for price fixing relate to explicit collusion; a public declaration of price agreements would typically imply transparency and legality, which contradicts the essence of tacit collusion; and no interaction between firms would negate the possibility of any form of collusion.