Cartels cooperate to act like a monopolist. Unilateral attempts to regulate commodity prices. OPEC members restrict oil production to raise price. Cheating with the cartel Cartel equilibrium generates incentive to cheat on the cartel. Firms profit by cheating.
Cartels tend to break down.
Obstacles to Forming a Cartel Problems in addition to cheating. The larger the number of sellers, the more difficult it is to reach an initial agreement to cooperate. The greater the difference among members, the more difficult it is to reach an agreement. The existence of nonmembers and new producers increases total supply and puts downward pressure on price. Higher prices by a cartel gives consumers an incentive to switch to or develop alternatives.