Firms in oligopoly markets are unable to collude effectively because cooperation is difficult with a large number of firms.

Question

Quizplus · Accepted Answer

Oligopoly markets are characterized by a small number of large firms that have the ability to collude and coordinate their actions to maximize profits. However, the difficulty in colluding effectively stems from the fact that each firm's profits depend not only on their own actions but also on the actions of their competitors. As the number of firms in the market increases, it becomes increasingly difficult for them to coordinate and cooperate, making effective collusion less likely.

Firms in Oligopoly Markets Are Unable to Collude Effectively Because