Why are successful collusive oligopolies rather short-lived?


It is difficult for firms of different size with different production costs and estimates of demand conditions to reach a collusive agreement. Once an agreement is reached, there is a great temptation for firms to cheat on the agreement for private gain. By undercutting the cartel price and increasing production, a cheating member may be able to boost profits significantly. In practice, cartel agreements are difficult to enforce--particularly since they are illegal under U.S. antitrust laws (as well as the laws of many other countries.) In addition, entry by new firms, or even potential entry, can undermine collusive agreements.

Economics

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The policy directive from the FOMC is carried out by

A) the presidents of the district banks. B) the presidents of commercial banks that are members of the Federal Reserve System. C) the account manager at the Federal Reserve Bank of New York. D) private dealers in the bond market.

Economics

The Case in Point on campus parking suggested that giving students lower fares for taking public transportation was what kind of factor in the demand for parking spaces?

A) supply shifter B) demand shifter C) false prophet D) spoiler

Economics

Economic theory is sometimes referred to as marginalism or marginal analysis because

A) it deals with matters not central to most people's personal lives. B) it emphasizes the effects of additional benefits and additional costs. C) it has such a minor effect on political decisions. D) it is only useful when it is added to a large stock of other knowledge. E) it was created by abstracting from experience.

Economics

Marginal revenue for an oligopolist is

A) identical to the demand for the firm's product. B) difficult to determine because the firm's demand curve is typically unknown. C) horizontal on a price-quantity diagram. D) downward sloping beneath the firm's demand curve.

Economics