Even ideal cartels tend to be unstable because
A) firms typically prefer competition to collusion as competition,because it leads to more profits.
B) collusion leads to lowest possible overall profits in the industry.
C) oligopolistic managers are extremely risk loving.
D) firms can benefit by secretly selling more than they promised the other firms
E) all of the above

Question

Quizplus · Accepted Answer

Cartels are unstable because individual firms have an incentive to cheat on the agreement to increase their own profits, such as by secretly selling more than they agreed to. This undermines the collective control over supply and prices that the cartel seeks to maintain.

Even Ideal Cartels Tend to Be Unstable Because