Question

An agreement between two duopolists to function as a monopolist usually breaks down because:

Answer 1

Answer:

c. each duopolist wants a larger share of the market to capture more profit.  

Explanation:

An agreement between two duopolists to function as a monopolist usually breaks down because each duopolist wants a larger share of the market to capture more profit.  

When the market is occupied by few firms as it is in the case of a duopoly, the possibility of collusion exists because it is characteristic of duopolies to set price and determine quantity to be produced in the bid to maximize profits. Nevertheless this collusion is usually short-lived because ultimately each firm faces the selfish desire of gaining more market share by cutting prices.