Limits to collusion include
A)price discrimination
B)economies of scale
C)horizontal market demand curves
D)high prices
E)incentives to cheat on the collusive agreement

Question

Quizplus · Accepted Answer

While collusion can lead to higher prices and profits for firms, there are limits to how effective it can be. One major limitation is that there are incentives for firms to cheat on the collusive agreement and undercut their competitors, leading to a breakdown in the collusion. This can be due to internal pressures to increase market share or external pressures from new entrants or changes in market conditions. Therefore, choice E is the best answer as it accurately identifies one of the main limits to collusion.

Limits to Collusion Include