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When Cartel Members Agree to Restrict Output to Increase the Price

question 68

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When cartel members agree to restrict output to increase the price of their product,a single member of the cartel has an economic incentive to violate the agreement by increasing its output so as to increase profits.


Definitions:

French And Raven

A theory identifying five bases of power: legitimate, reward, coercive, expert, and referent.

Rewards And Punishment

A psychological principle involving the use of positive reinforcements or penalties to influence behavior.

Diffuse Status Characteristics

Attributes that individuals carry into social situations that can affect perceptions and interactions, often unrelated to specific abilities or tasks at hand.

Status Allocation

The process by which social status is distributed among the members of a group.

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