Assume the firms in an oligopoly produce a differentiated product and are initially colluding.If each firm begins to cheat (to increase sales)by underpricing the other firms,as the amount of cheating increases,the resulting industry price and output will approach the outcome for:

Question

Quizplus · Accepted Answer

As each firm begins to cheat by underpricing the other firms, it creates a noncooperative environment where they are no longer colluding. This leads to a noncooperative oligopoly where each firm is trying to maximize their individual profits, which can lead to price wars, lower prices, and potentially lower output levels. Therefore, the best choice is D - noncooperative oligopoly.

Assume the Firms in an Oligopoly Produce a Differentiated Product