Learning objectives
Explain interdependence in oligopoly and why firms may collude formally in a cartel or tacitly, for example through price leadership
Construct and interpret a two-firm pay-off matrix, identify each firm's dominant strategy and explain the Prisoner's Dilemma outcome
Explain the conditions that make a cartel effective, such as few firms, similar costs, barriers to entry and the ability to detect cheating
Analyse the consequences of cartels for price, output, consumers and efficiency, and why cartels tend to break down
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