Final answer:
Middlemen who focus on securing profit for themselves over manufacturers may engage in 'cherry-picking,' which is accepting orders from well-established brands with high demand. Oligopolistic markets may see firms exerting mutual pressure to maintain agreed outputs, while formal collusion agreements, or cartels, are illegal.
Step-by-step explanation:
Left to their own devices, middlemen may maximize their own profit rather than that of the manufacturer, engaging in a practice where they accept orders primarily from manufacturers with established demand for certain products, known as cherry-picking. Oligopoly firms may be involved in similar behaviors, closely monitoring competitors and exerting pressure on each other to maintain agreed outputs. However, legally enforceable agreements to act as monopolies are not permissible, leading firms to find other methods to indirectly influence market conditions and pricing strategies. As such, manufacturers can suggest minimum prices for their products and cease sales to dealers who frequently sell below these suggested prices, although they cannot enforce these as minimum resale price agreements due to competition laws.
Moreover, brand recognition plays a significant role in market competition; the challenge for new entrants is often not production but rather developing a brand and marketing that can compete with established names, such as Coca-Cola or Pepsi. In some cases, collusion among firms in an oligopolistic market may occur to keep prices high and output low, but formal agreements, or cartels, are illegal in many jurisdictions.