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3 How is a collusive outcome enforced?(How Do Cartels Operate?)(monitoring of price )

From: Foundations and Trends in Microeconomics  |  Date: 7/1/2006  |  Author: Harrington, Joseph E., Jr.

Having coordinated on price and/or an allocation of the market, the agreement must then be implemented. In doing so, there is the concern that cartel members may cheat by pricing too low, selling too much, attracting other firms' customers, and committing other violations of the understanding among firms. Towards deterring such cheating, cartel members' behavior was monitored and, if there was a significant deviation from the agreed-upon outcome, the deviator was punished and the ...

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