could stand as the motto of cartels everywhere.

How to Enforce Cooperation

How can parties who find themselves in a prisoner’s dilemma situation avoid the undesired outcome and

cooperate with each other? The way out of a prisoner’s dilemma is to find a way to penalize those who do not

cooperate.

Perhaps the easiest approach for colluding oligopolists, as you might imagine, would be to sign a contract with

each other that they will hold output low and keep prices high. If a group of U.S. companies signed such a

contract, however, it would be illegal. Certain international organizations, like the nations that are members of

the Organization of Petroleum Exporting Countries (OPEC), have signed international agreements to act like a

monopoly, hold down output, and keep prices high so that all of the countries can make high profits from oil

exports. Such agreements, however, because they fall in a gray area of international law, are not legally
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