An Agreement Among Members Of An Oligopoly To Set Prices And Production

An Agreement Among Members Of An Oligopoly To Set Prices And Production

Several factors deter collusion. First, price cartels are illegal in the United States and there are antitrust laws to prevent agreements between companies. Secondly, coordination between companies is difficult and increases all the more as companies are involved. Third, there is a risk of overflow. A company can agree to enter into agreements and then break the agreement, thereby undermining the profits of the companies that still maintain the agreement. Finally, a company may be deterred from entering into a cartel if it is not able to effectively sanction companies that may be in breach of the agreement. An agreement is a formal agreement between companies with the aim of increasing profits. An agreement is an agreement between competing companies to work together to make higher profits. Each company would receive half of the market at a higher price than the marginal price. However, a slight drop in prices would allow a company to win the entire market.

As a result, both companies are tempted to lower prices as much as possible. However, it would be irrational to rent below marginal costs, because the company would make a loss. Therefore, both companies will lower prices until they reach the marginal cost limit. On this model, a duopoly results in a result that corresponds exactly to what reigns in perfect competition.. . . .

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