Sunday, April 12, 2020

Colluding to Increase the Price of Oil

OPEC+, Russian, the USA, Mexico, and perhaps other countries are trying to reach an agreement to reduce the amount of oil produced (Yahoo, April 2020). The story illustrates the gains from colluding and also the difficulty in achieving and maintaining a collusive agreement.

  1. Why would Mexico hold out? What does "hold out" mean?
  2. Why would OPEC+ agree to cut production "conditional on the consent of Mexico".
  3. What must be true about the demand for oil if a reduction in production worldwide => and increase in total revenues worldwide for the producers. 

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