If there are many firms in an industry,there is little incentive for firms to engage in tacit collusion because a smaller proportion of the units of the product sold are affected by the price effect if a firm increases output.

Tacit Collusion

An unspoken, informal agreement among competitors to limit competition, such as by fixing prices or dividing market territories, without explicit communication.

Price Effect

The impact that a change in the price of a good or service has on consumers' demand for that good or service.

Output

The quantity of goods or services produced in a given time period.