In which of the following situations is cheating on a collusive agreement is most likely?

Question

Quizplus · Accepted Answer

When prices are difficult for competitors to observe, it becomes easier for colluding firms to cheat on the agreement without being detected. This is because there is no way for the firms to monitor each other's prices and ensure that everyone is adhering to the agreed-upon prices. In situations where prices are publicly posted or the market demand curve is elastic, there is a greater likelihood that cheating will be detected and punished. Similarly, in markets with few sellers or economies of scale, collusion tends to be more stable and enforceable.

In Which of the Following Situations Is Cheating on a Collusive