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Oligopoly: Why do Cartels often Collapse?

Level:
A-Level
Board:
AQA, Edexcel, Eduqas, IB, OCR, WJEC

Last updated 21 Mar 2021

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Many collusive agreements between firms in an oligopoly eventually collapse either because of exposure by the competition authorities, the impact of a recession or perhaps because of a breakdown in co-operation between firms and cheating on output agreements. A simple game theory pricing game can also help to explain why a price-fixing cartel can be undermined over time.

Oligopoly: Why do Cartels often Collapse?
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