Question

What are the incentives for firms in an oligopoly to collude or work together? Why is collusion or coordination (such as cartels) not prevalent in the United States and other developed countries? Do you agree with U.S. antitrust laws that prevent or limit collusion or cartels?

Answer 1

What are the incentives for firms in an oligopoly to collude or work together?

• Oligopoly firms have strong incentives to collude since by colluding these firms move towards the monopoly. Monopoly market relatively would be more profitable. It restricts output and raises price.

Why is collusion or coordination (such as cartels) not prevalent in the United States and other developed countries?

• Collusion and cartels are not prevalent in USA. Anti trust law keeps strict vigil on working of firms. It declares such collusion and cartel null and void if competitive forces are compromised.

Do you agree with U.S. antitrust laws that prevent or limit collusion or cartels?

• US anti trust law keeps on analyzing the possible collusion and resultant impacts on competitive forces. It uses H-Index if collusion negatively affects competition or not.