Unformatted text preview: in a Application: Merger Provisions of Canada's Conpetition Act C = [email protected]; M : Monopoly Cartel $ / unit PM Market Shucture and the Incentive to Innovate o Prcm a static perspective, monopoly is socially undesirable because oulput is restricted. o Hcruvener, it is sometimes argrred that monopolists are also more irnrentive and irurovative, so that from a dynamic perspectire the negative effects oi monopoly are reduced or renersed, o fire JcJrnrnpebrtan Eypothesi,ssuggests that fims with market po$rer are more likely to engage in irurorative activity or to irwest in R&D. j J , .7 This example depicts equal quotas for 4 members. Cartels arc inherentlyunstable. It is very temptingto overproduce and take advantage ofhigh price. Ifthe cartel's production is not alarge enough proportion ofworld productiorl then non-members can also take advantage ofthe high price....
View Full Document
- Fall '10
- Oligopoly, Competition law, Collusion, monopoly profits, Ifthe cartel