A horizontal agreement in economics is a form of collusion between two or more companies at the same level of the production process. This type of agreement is also known as a horizontal restraint, and it occurs when two or more companies that produce similar products or services agree to restrict competition among themselves.

Horizontal agreements can take many forms, including price-fixing, market sharing, bid-rigging, and group boycotts. These agreements are typically illegal under antitrust laws in many countries because they reduce competition and harm consumers by increasing prices and worsening product quality.

Price-fixing is perhaps the most common type of horizontal agreement. This occurs when two or more companies agree to set prices at a certain level for their products or services. The result is that consumers are forced to pay higher prices than they would in a competitive market.

Market sharing is another type of horizontal agreement. In this case, two or more companies agree to divide up a market among themselves. For example, one company might agree to focus on one geographical region, while another company focuses on another region. This means that consumers in each region have fewer options to choose from, leading to higher prices and lower quality products or services.

Bid-rigging is a form of horizontal agreement where companies collude to rig bids on contracts. This is typically done in the construction industry, where companies agree to take turns winning contracts by submitting bids that are too high or too low. This results in higher costs for the consumers and taxpayers who fund the contracts.

Group boycotts are another form of horizontal agreement. This occurs when two or more companies agree not to do business with a certain company or group of companies. This can be done to punish a competitor or to force a supplier to lower their prices.

In conclusion, horizontal agreements in economics occur when two or more companies at the same level of the production process collude to restrict competition among themselves. This is typically done through price-fixing, market sharing, bid-rigging, or group boycotts. These agreements harm consumers by reducing competition and increasing prices and lower quality products or services. As such, they are illegal under antitrust laws in many countries.