Difficulty in arriving at a mutually acceptable agreement to restrict output 2. Punishment mechanism. If the cartel can restrict output and increase the price above the current competitive level, cartel members have an incentive to cheat by producing more that their allotment. There must be some kind of deterrent to cheating 3.Entry of new firms. If the cartel members are successful in creating monopoly profits, they are faced with new firm eager to enter. If entry occurs, the cartel loses monopoly power and profit