Cartels are typically subject to cheating by their members because
A) if the other firms stick to the agreement, a firm can increase its profits by cutting its price.
B) barriers to entry do not exist so new entrants will join.
C) the U.S. Justice Department will punish any cartel agreement before the cartel has had a chance to operate.
D) product differentiation allows the firms in the cartel to cheat.

Question

Quizplus · Accepted Answer

Cartel members have an incentive to cheat by cutting prices because if other members adhere to the agreement, the cheating firm can capture a larger market share and increase its profits.

Cartels Are Typically Subject to Cheating by Their Members Because