Firms may have incentives to cheat on cooperative agreements when maintaining a collusive agreement has high ________ costs.

Question

Quizplus · Accepted Answer

Opportunity costs refer to the benefits a firm misses out on when choosing one alternative over another. In the context of maintaining a collusive agreement, the high opportunity costs come from the profits a firm could have earned by competing rather than colluding, which can incentivize a firm to cheat on the agreement.

Firms May Have Incentives to Cheat on Cooperative Agreements When