Firms in an oligopoly can increase profit by

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In an oligopoly market, where there are a limited number of firms, each firm has a significant impact on the market. Firms can increase their profits by collectively reducing output and raising prices. This strategy is known as collusion, and it is illegal in most countries. However, even without formal collusion, firms can indirectly coordinate their behavior through tacit collusion or price leadership. Independent actions to raise prices may result in a price war among firms, reducing profits for all firms. Acting alone and refusing to join the group is unlikely to increase profits significantly in an oligopoly market.

Firms in an Oligopoly Can Increase Profit by