Why firms try to collude and discuss the factors that may facilitate and hinder sustained collusion with reference to a particular case.

In this essay, I am going to talk about the reasons that firms may decide to collude, the factors that help and prevent collusion, the types of collusion and a case study (OPEC) which illustrate the points. In an Oligopoly industry, there are only a few firms between them share a large proportion of the industry. Unlike firms under Monopolistic, there are various barriers to the entry of new firms, the size of the barriers, …

…cheating does not change, and neither does the punishment. But, with more firms, each firm is earning less from cooperating, or colluding. So, the more firms in an industry, the more incentive there is to cheat, and the less likely that collusion can be sustained. Bibliography: F M Scherer, Industrial Market Structure and Economic Performance John Sloman, Economics (fourth edition) OPEC source is from www.opec.org Davies & Lyons, Economics of Industrial Organisation