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Firms A and B are two oil manufacturers. They dominate an oil market and decide to collude. If they limit production, the market price of
Firms A and B are two oil manufacturers. They dominate an oil market and decide to collude. If they limit production, the market price of oil will increase and each firm will gain $3 million. If one firm cheats on the agreement and expands its own production, the firm will gain $5 million and another firm will gain zero. If both firms break the agreement and expand their productions, each firm will lose $10 million. Which scenario could be an outcome of the collusion?
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