I grade on a curve. So if all of my students studied 50% less, they might learn less economics, but their grades would stay the same. The students keep studying because they are in a Prisoners' Dilemma - their lives would be easier if they all studied 50% less, but if one student unilaterally did so, his grade would suffer.
After calling attention to their plight, I often advise my students to try collusion. Call a meeting, work out study quotas, and see how much easier their lives get. To date - and as far as I can tell - no class has ever called my bluff (though once I taught a class with four students, and got a little nervous!).
Frankly, I'm not worried. I'm not afraid to put bad ideas in my students' heads because I'm confident that attempted collusion would fail. And in the process, my students would learn a valuable economic lesson.
1. Hold-outs. In any class with more than a few students, there are bound to be a few contrarians who refuse to join the cartel. They might be Mormons, or lovers of economic wisdom, or just very disagreeable. But they will exist, and they will ruin the curve for students who abide by any collusive agreement.
2. Cheating. Many, perhaps most, of the students who formally adhere to the cartel won't live up to its terms. If much of the class is slacking off, students who put in a little extra work can get an easy A. When the other colluders accuse them of cheating, they'll just deny it: "No, I didn't study at all. I'm just smart/lucky/etc."
3. Division of spoils. It's easy to say "Let's all work 50% less." But 50% less than what? 50% less than you worked last semester? Students who intend to start raising their GPAs won't like that deal. Similarly, the studious won't appreciate an offer like "Let's all study a maximum of two hours per semester," because that is a much bigger sacrifice for them than it is for the slackers. These tensions make it hard to reach a collusive agreement.
4. New entry. If word gets out that I grade on the curve and my students are colluding to take advantage of the system, I bet a lot of students will want to add my class. (I always sign add forms... everyone's entitled to my opinion!) And what is the cartel to do with these new students? Invite them in? Exclude them? Buy them off? There's no good solution.
The point of all this isn't primarily to convince my students that their collusive plans are bound to fail. The real point is to illustrate why forming and maintaining a successful business cartel is so much easier said than done.
In fact, in many ways my students have it easy. In my classroom, there is an upper bound on how much one hold-out can raise the class average; once a student has 100% of the possible points, he can't make the curve any harder. In business, on the other hand, a firm facing an artificially high price might expand its output by a factor of ten, a hundred, or more.
Furthermore, if my students' cartel doubles the size of my class, I automatically double the number of A's and B's that I hand out. But in business, it doesn't work that way - doubling the number of firms doesn't double demand; in fact, the number of firms normally won't affect demand at all.
Question: Has anyone ever observed classroom collusion? If so, how successful was it in reducing students' average level of effort?