How they would influence the global market for rice

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Reference no: EM132116710

Question: Asian Rice Exporters to Discuss Cartel The Asian rice-exporting nations planned to discuss a proposal that they form a cartel. Ahead of the meeting, the countries said that the purpose of the rice cartel would be to contribute to ensuring food stability, not just in an individual country but also to address food shortages in the region and the world. The cartel will not hoard rice and raise prices when there are shortages. The Philippines says that it is a bad idea. It will create an oligopoly, and the cartel could price the grain out of reach for millions of people.

a. Assuming the rice-exporting nations become a profit-maximizing colluding oligopoly, explain how they would influence the global market for rice and the world price of rice.

b. Assuming the rice-exporting nations become a profit-maximizing colluding oligopoly, draw a graph to illustrate their influence on the global market for rice.

c. Even in the absence of international anti-trust laws, why might it be difficult for this cartel to successfully collude? Use the ideas of game theory to explain.

Reference no: EM132116710

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