Oligopoly firms that cheat on pricing agreements Qbank quantity, indicate, question, perfect, correct

bdavi77962

Statement 1: “When oligopoly firms cheat on price fixing agreements, the resulting price and output quantity approaches that of perfect competition.”
Below is a statement form a qbank question, they didnt indicate whether or not it was correct in the answer explaination, I’m assuming it is but can anyone clarify?

tango_gs

That is Nash equilibrium. Both firms cheat and neither firm will make an economic profit which is like perfect competition.

Analti_Calte

This was on the AM mock–
for each firm, it is in their best interests to cheat (aka increase quantity), so they will cheat.
Since both will cheat, the increased quantity will decrease the price.
The decreased price means that the whole situation approaches that of perfect competitionzero economic profit.
This is all they want you to know I think