Question

In many oligopolistic​ industries, the same firms compete over a long period of​ time, setting prices and observing each​ other's behavior repeatedly. Given the large number of​ repetitions, why​ don't collusive outcomes typically​ result?

Answer 1

An oligopoly is when a market is controlled by a small group of two or more firms. Businesses in an oligopoly can agree in price collusion and create a barrier for entry for new commerce. For oligopolies to be stable, the firms must see the benefits of collaboration over the costs of economic competition. In other words, they do not collude since the oligopoly is based on cooperation.