Question

1. Explicit collusion by members of a cartel is illegal in the United States and many other countries. Nonetheless, cartels do manage to form and, in some cases, persist for extended periods. Can you identify actions cartel members could take that might help them coordinate their actions but stop short of explicit agreements?

2. List five examples of markets that you would consider to be oligopolies (a few firms engaged in strategic competition). For each example, explain whether you think the market is an example of Cournot or Bertrand competition (or neither).

3. Discuss why product differentiation is an important feature of many oligopoly markets. What is the effect of increased differentiation on the profitability of the firms in the market?

Please answer all the three questions by one paragraph for each in one posting.

Answer 1

Solution:

1. when Cartel is operating its true that it will benefit all the members of the cartel is true. but its also true that its difficult to balance individual interest when setting up the cartel. and also more difficult to monitor the individual members wont cheat. Thus for that what incentive is to use the cartel to raise general prices and reduce over production which formation of cartel,

2. Formation of cartel, stackalberg duopoly, cournot , betrand model of competetion

Pepsi and cocoa-cola ( carbonated beverages), toothpastes, automobiles, coffee. under this carbonated beverages , toothpaste are the examples of Bertrand model of competition.

3. Product differentiation is a situation when monopolist charges different producers under monopolistic competition, try to differntiate their products in terms of its shape, size packaging, trademark or brand name. this product differentiation is done to attract buyers from the rival firms in the market.