Suppose an oil cartel has an agreement to restrict members' production in order to maintain a price of $40 per barrel.A single cartel member may want to cheat and exceed its quota so that it can:

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By exceeding its quota and producing more oil, the cartel member can sell more barrels at the agreed-upon price of $40 per barrel and thus earn more revenue and profit. However, cheating can also undermine the stability of the cartel and lead to a breakdown of the agreement, which could ultimately hurt all members' long-term profits.

Suppose an Oil Cartel Has an Agreement to Restrict Members