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Cartel behavior in coal industry and the incentive to cheat.

Suppose that the soft coal industry is a competitive industry and it is in long run equilibrium. Now assume that the firms in the industry form a cartel.

(a) What will happen to the equilibrium output and price of coal, and why?
(b) After the cartel is operating, are there incentives for the individual firms to cheat? Why?
(c) Does the possibility of entry by all potential firms make a difference in the behavior of the cartel?

 

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M916166

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