Reference no: EM132285768

Suppose the CEO comes up to us one day. (He's friendly enough, but given some of his ideas, you're starting to dread these conversations.) "Hey. I have an idea," the CEO begins. You brace yourself and smile. "Oh yeah?" He nods affirmatively and begins. "I say we increase the price of our dry cleaning fluid by five percent tomorrow." "Why is that? Things are looking pretty good for us right now." He shakes off your reassurance. "Yeah, but we can do better. You know Bobby's place, just down the road?" You start to feel a sense of dread. Bobby is a competitor of your company in the dry cleaning market. He also has a less-than-stellar reputation in the business community. "Of course. I know Bobby's Chemical Solutions. They produce dry cleaner fluid just like we do." "Yep. And he and I have been talking. We're the only companies in the tri-state area who supply enough dry cleaning fluid to local companies. Transportation costs of all our other competitors are too high for them to supply the dry cleaners." You're impressed. Your boss has been doing some research on the industry. He continues. "So Bobby and I had dinner last night after the Chamber of Commerce meeting. We'll both increase our prices by five percent starting tomorrow, and we'll be able to make a fortune." "What happens if the government investigates why we increased our prices at the same time that Bobby did?" you state. "Collusion is illegal, and the government is rather serious about it." The CEO smiles. "It's ok. We didn't put anything down in writing. If the government investigates, we'll just say we're changing our prices due to evolving market conditions. If Bobby would have to respond to a new economic environment, then so would we! This is foolproof!" What would we tell to our CEO to convince him not to pursue this course of action? Try to play to his economic side instead of his legal sensibilities.