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When a government sets a maximum price with the incentive of lowering the price of a good, firms may tacitly collude to set their prices at the maximum legally allowed price if they have previously sold the good at a lower price.
This may lead to hidden inflation.
Anchoring amongst firm management makes firms that have previously charged a price below the ceiling realise they leave money on the table.Â
Reduced competition due to uniform pricing can reduce incentives for price wars and competitive discounting / undercutting.
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