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Author Question: What creates an incentive for firms in a collusive agreement to cheat and increase output? What ... (Read 161 times)

luminitza

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on: Jun 29, 2018
What creates an incentive for firms in a collusive agreement to cheat and increase output?
 
  What will be an ideal response?

Question 2

An Inquiry into the Nature and Causes of the Wealth of Nations published in 1776 was written by
 
  A) Alfred Marshall. B) Karl Marx.
  C) John Maynard Keynes. D) Adam Smith.
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welcom1000

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Reply #1 on: Jun 29, 2018
Answer to Question 1

All firms in a collusive agreement face the same optimal strategies: their payoff is high if they all comply, but the payoff to any one firm that cheats is even higher if all the other firms comply. This motivates each firm to cheat on the agreement.

Answer to Question 2

D


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