[alpaca128]

Or they could all just agree to not cut prices so everyone profits more than with a race to the bottom. Not the first nor last time for this to happen.

Undercutting the competition pays off when they're much smaller and you can eliminate them that way and subsequently raise prices.

[wat10000]

They could. It's very hard to enforce a cartel like that when there are a large number of competitors. It's a prisoners' dilemma with dozens or hundreds of participants. It only takes one defector to break it.

If you've ever shopped for car insurance, it should be pretty clear that there isn't a cartel holding prices high. Prices differ substantially across insurers, and are influenced by many other factors as well. Premiums are much lower if you have a clean driving record and no claims, or if you drive a car that's cheaper to repair, or less likely to cause injury, or you're of an age/gender with less propensity to crash, or live in an area with less automobile-related crime. Why would they give you lower rates for these things when they could just keep the premiums high and collect more profits?