Which of the following correctly explains why cheating is a common problem for cartels?
An individual cartel member has an economic incentive to sell less than its quota, thus cheating on the cartel agreement. However, if all cartel members sell less than their quotas, the cartel price will rise, and profits will increase.
An individual cartel member has an economic incentive to sell more than its quota, thus cheating on the cartel agreement. However, if all cartel members sell more than their quotas, the cartel price will fall, and profits will vanish.
Answers: 2
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Which of the following correctly explains why cheating is a common problem for cartels?
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