Once firms in a collusive duopoly start cheating on the agreed-upon price, the cheating usually continues until the price is

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Once firms in a collusive duopoly start cheating on the agreed-upon price, the cheating usually continues until the price is driven down to marginal cost. This is because each firm has an incentive to undercut the other firm's price to gain a larger market share and increase profits. As both firms start to lower their prices, the price will eventually reach the competitive level of marginal cost.

Once Firms in a Collusive Duopoly Start Cheating on the Agreed-Upon