An agreement between two duopolists to function as a monopolist usually breaks down because
A) they cannot agree on the price that a monopolist would charge.
B) they cannot agree on the output that a monopolist would produce.
C) each duopolist wants a larger share of the market in order to capture more profit.
D) each duopolist wants to charge a higher price than the monopoly price.

Question

Quizplus · Accepted Answer

Each duopolist wants to capture a larger market share in order to maximize their profits. This ultimately leads to strategic behavior and potential cheating on the agreed upon production and pricing levels. As a result, the agreement usually breaks down and the duopolists revert back to competing with each other.

An Agreement Between Two Duopolists to Function as a Monopolist