Collusion in oligopoly is difficult to achieve because:
A) it is prohibited by law.
B) every firm has an incentive to cheat given that others follow the agreement.
C) firms usually take care of consumers' interests as a decision priority.
D) it is prohibited by law and every firm has an incentive to cheat given that others follow the agreement.

Question

Quizplus · Accepted Answer

Collusion in oligopoly is difficult to achieve both because it is often illegal and because even when firms agree to set prices or output levels collectively, each firm has an incentive to cheat on the agreement to gain more market share or profit, assuming others will stick to the agreement. This makes such arrangements unstable.

Collusion in Oligopoly Is Difficult to Achieve Because