In cases where a cartel controls access to a key production input, firms in the cartel:
A) will always have an incentive to cheat on the agreement as cheating increases profits.
B) have less incentive to cheat for fear that they will be cut off from the key input.
C) are typically good at finding ways to access the key input outside the cartel.
D) will never cheat on the cartel agreement.

Question

Quizplus · Accepted Answer

Firms in the cartel have less incentive to cheat for fear that they will be cut off from the key input. If they cheat, they risk losing their access to the input, which could severely harm their production capabilities and profitability. Therefore, they are likely to adhere to the cartel agreement to maintain access to the input.

In Cases Where a Cartel Controls Access to a Key