The industry environment and the macro environment.

There are cost differences between the firms of cartel. For example, the firm with lower cost will sell more output and earn more profit, but this is not possible in the cartel, as cartel firms are obliged to share the profit irrespective of their cost structure.

The commission has adopted a dominant strategy by threatening price fixers with extremely large fines on one hand, and at the same time, promising the whistle-blower an escape from the huge fine of 331 million pounds. This strategy is dominant because it will provide optimal results to the commission. This is because no firm will collude again due to the fear of having to pay a big amount of fine. Moreover, the existence of whistle-blowers like Micron is another negative factor.

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The authority will try to allot a contract to the lower bidder, because in this case it will have to pay £ 200000 only. Whilst, bidders will try to earn maximum profit by cutting down each other, so if the contract is split up into two companies, then the authority has to pay £220,000 which is less than £ 300000 and more than £ 200000. However, if one company succeeds in obtaining the contract, then the authority will have to pay £220,000 which is again lower than £ 300000 but greater than £ 200000.

The result of the secret competitive tendering was observed by repeated games, because the bid involves two competitors with many bidding options. Both bidders will try to earn the maximum profit by cutting back the other. Both will be afraid of making high bids, because in that case, one of them will end up losing the contract. In short, a final decision can be reached after playing repeated strategies and assessing the moves of each other.

The concept of beauty care industry is as old as mankind.

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