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From Economic point of view, in terms of oligopoly situation, collusion implies "playing together". When the competing firms cooperate in pricing their products and agree on their market share, they are said to be engage in collusion.

Collusive oligopoly refers to a situation where the firms in a particular industry decide to come together as a single unit for the purpose of maximizing their joint profits and to negotiate among themselves regarding their market share. The former known as the 'joint profit maximisation cartel' and later as 'market sharing cartel'.

In oligopoly situation, when the various firms instead of competing with each other follow a common price-output policy, it is known as collusive oligopoly. Such collusion may be open or secret.

Open collusion known as formal or explict collusion where firms enter into a formal agreement pertaining to price and share in the market. Such formal or open collusions are now illegal in a number of countries and even in those countries where these have not been declared unlawful, here firms avoid entering into open collusion for fear of inviting stage intervention.

Secret collusions are quite common in countries where their information is not permissible under law. There is an understanding or agreement between the firms on prices, output, market share etc.

On the other side, if there is no agreement or understanding between oligopoly firms, it is known as non-collusive oligopoly.

Cartel is a perfect form of collusion. Cartel refers to central agency which determines output quotas for the firms price to be charged and distribution of profit. It follows common policies relating to prices, output, sales and profit maximisation and distribution of profits.

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