All else constant,a cartel agreement will become more difficult to enforce as the number of firms competing the market increases and the members of the cartel produce a differentiated product.

Question

Quizplus · Accepted Answer

When there are more firms competing in the market, it becomes easier for non-cartel members to enter the market, and the cartel's market share decreases. Additionally, when firms produce differentiated products, it can be more challenging to coordinate production levels, prices, and market shares within the cartel. Both of these factors make it more challenging to enforce a cartel agreement.

All Else Constant,a Cartel Agreement Will Become More Difficult to Enforce