Which factor does not contribute to an industry's potential for collusion?

High product differentiation does not contribute to an industry's potential for collusion because it makes it difficult for firms to coordinate prices or output levels. When products are highly differentiated, each firm has its unique market position and customer base, leading to varied pricing strategies. This diversity in products results in less direct competition among firms with differentiated offerings, which diminishes the likelihood of collusion since companies are not competing in the exact same market space or targeting the same customers.

In contrast, a high concentration ratio indicates that a few firms dominate the market, creating an environment more conducive to collusion since a limited number of players can easily agree on pricing strategies. The presence of a price leader suggests that one dominant firm sets the prices for the entire industry, which can facilitate collusion among followers. Multimarket competition refers to firms competing in multiple markets, which can also encourage collusion since firms may have more opportunities to interact and coordinate across different contexts.