3. Collusion is the opposite of competition. Oligopolists have a strong incentive to collude and raise their prices. However, the interests of individual firms will conflict with those of the ind ustry . Since the demand curve faced by individual firms is far more elastic than the industry demand curve, each firm could gain by cutting its price (or raising product quality) by a small amount so that it could attract customers from rivals.

If several firms tried to do this, however, the collusive agreement would break down.