Question

Why cartels like OPEC fail to reach to consensus on price and quantity?

Why cartels like OPEC fail to reach to consensus on price and quantity?

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Answer #1

The Organization of Petroleum Exporting Countries (also termed to be OPEC) are categorised to be example of cartel as a type of oligopoly. The governments in the OPEC will agree on the coordination with petroleum firms (inclusive of both the private as well as the state owned) in the manipulation of the global oil supply and its price. However the individual profits can be gained by the firm who would be cheating on their cooperative agreement. In the long run the cartels the consensus on price and quantity would be likely to be unstable due to the inherently instability of cooperative agreements on price and quantity among the members of cartel.

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