Cartel - Micro HW Question (Check Answer)?

Question

Consider the market for Picasso paintings. Assume that there are four galleries that sell Picasso paintings and they have formed a cartel.

Suppose there are a limited number of Picasso paintings in existence, making it difficult for new galleries to acquire Picasso paintings and enter this market. What effect does this have on the sustainability of the cartel?

A. This makes the cartel less sustainable.

B. This has no effect on the sustainability of the cartel.

C. This makes the cartel more sustainable.

My Answer: C - makes cartel more sustainable because of the difficulty to obtain paintings.

Answer 1

C. This makes the cartel more sustainable.

You are right - since there is no extra supply possible and in such environment all cartel members may easily control each-other - this ensures absence of cheating incentives.