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Author Question: Collusion makes firms better off because if they act as a single entity (a cartel) they can reduce ... (Read 6 times)

Arii_bell

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Collusion makes firms better off because if they act as a single entity (a cartel) they can reduce output and increase their prices and profits. But some cartels have failed and others are unstable. Which of the following is a reason why cartels often break down?


Each member of a cartel has an incentive to "cheat" on the collusive agreement by producing more than its share when everyone else sticks with the collusive agreement.


Most cartels do not have a dominant strategy.


Members of a cartel may resent having to share their profits equally.


When a cartel is profitable the amount of competition it faces increases.



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Marked as best answer by Arii_bell on Oct 8, 2019

dajones82

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