There are many models for oligopoly because of this interdependence. The interdependence and how it affects behavior causes the demand curve facing the firms to be different. Kinked Demand Curve Cost-Plus Cartels Since there are few firms in the oligopolist market, some firms may try to collude. Collusion is when firms come together and agree on price and output levels in order to decrease competition and increase profit. When they do this, they are acting as a single monopolist so they can earn monopoly profit.
Cartels are more popular where the product is homogeneous as with oil, steel, etc.
The cartel offers to its member s greater certainty about the behavior of the competitors. They are able to block entry into the market. Consumers typically suffer under cartels because prices are higher and output is limited. Collusion and cartels are illegal in the U.S. Other countries are much more tolerant. Some countries encourage it.