Explain why member firms of a cartel like OPEC have incentives to agree to a low cartel production level and then produce more than its quota
What will be an ideal response?
A low cartel production level results in a high market price for oil. Thereafter, each firm has an incentive to unilaterally cheat on the agreement by producing beyond its quota. Of course, ultimately if everyone cheats then the price of oil will fall, but at least for a while some members will earn higher profits than they would if they had adhered to their quotas.
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Ignoring the Ricardo-Barro effect, what impact does the government have in the loanable funds market?
What will be an ideal response?
A compensation structure that generates much higher pay rates for the top performers, while those whose productivity is only a little lower receive substantially less compensation, is called
a. competing differentials. b. winner take all. c. dueling executives. d. tournament pay.