question archive A successful and stable cartel can be established if there are a
A successful and stable cartel can be established if there are a
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A successful and stable cartel can be established if there are
a. many firms producing a perishable product.
b. many firms producing a storable product.
c. a few firms producing a perishable product.
d. a few firms producing a storable product.
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The answer is C. The fewer the number of firms the stronger the chances of the oligopoly succeeding. The four-firm concentration tells us that if there are four firms with over 90% market share there is a strong chance of an oligopoly. If the good is perishable the product can not be stored so the demand for the product stays constant over time instead of variable. This means that a cartel is stable when there are a few firms with a perishable product.
