What is the advantage to a particular firm of cheating on an otherwise effective cartel?
A) The industry can then act like a monopoly.
B) It decreases risk.
C) It enhances credibility.
D) It always pays in the short run and may pay in the long run.
E) It always pays in the long run and may pay in the short run.

Question

Quizplus · Accepted Answer

By cheating on a cartel, a particular firm can increase its profits in the short run by selling more than their allocated share of the market. While it is not sustainable in the long run, the firm may still benefit in the long run if they can successfully navigate any potential consequences of their cheating. Additionally, by selling more than their share, the firm decreases the risk of losing market share to competitors who were following the cartel agreement.

What Is the Advantage to a Particular Firm of Cheating