What Are The Other Firm`s Profits After The Agreement Is Broken

Assuming the payments are known to both companies, what is the likely outcome in this case? Perhaps the simplest approach for the best collusion oligopolists, as you can imagine, would be to sign a contract with one another to keep production low and prices high. However, if a group of American companies signed such a contract, it would be illegal. Some international organizations, such as the member countries of the Organization of the Petroleum Exporting Countries (OPEC), have signed international agreements to act as a monopoly, keep production low and keep prices high so that all countries can derive high profits from oil exports. However, such agreements are not legally enforceable because they fall within a grey area of international law. The oligopoly is a market structure in which there are a few companies that produce a product. If there are few firms in the market, they may agree to set a price or level of production for the market in order to maximize the profits of the industry. As a result, the price will be higher than the market compensation price and production is likely to be lower. In extreme cases, collusive enterprises can act as a monopoly and reduce their individual production, so that their collective production would correspond to that of a monopolist, so that they can make higher profits. To achieve this equilibrium, we assume that each enterprise adjusts its production to maximize its profits, which are the same The demand for the production of the deviant enterprise is much more elastic than the demand of industry, given the constant production of the other enterprise, and the marginal turnover of the deviant enterprise, designated by MR, is also much flatter and closer to the demand curve of the company, if it increases its production beyond what has been agreed in the collusory. Arrangement.

The collusive demand and marginal yield curves are given by the dotted lines of the figure that extend from the h point on the right to the right. The demand curve of the deviant firm must pass through the collusive demand curve in the collusive equilibrium of prices and volumes. If the deviant firm increases its production of dq while the other company maintains its output at the collusive level, the market price decreases by 0.0325 dq, as obtained from equation 1 with dQ = dq.. . .