Cheating on a collusive agreement is more likely when
A)a price floor is in effect
B)firms are located in the same state
C)it is easy to observe the other firms' prices
D)there is a small number of firms
E)market demand is unstable

Question

Quizplus · Accepted Answer

When market demand is unstable, firms may be more tempted to cheat on a collusive agreement to capture more market share or revenue, as the benefits of sticking to the agreement become less predictable.

Cheating on a Collusive Agreement Is More Likely When