Final answer:
The investment required for two firms to effectively coordinate their efforts in a supply chain depends on various factors such as technological advancements, transportation methods, labor policies, and labor rights. Cartel formation is another strategy altogether, involving price and output control, which is not always permissible. Effective collaboration requires good faith negotiations and solutions that reduce costs.
Step-by-step explanation:
The question pertains to the investment needed for two firms in a supply chain to coordinate their activities effectively. The level of investment required can vary significantly based on numerous factors, including the complexity of the supply chain, the technology used, and the existing relationship between the firms. Coordination can be facilitated by the advancement of technology, improved transportation methods, and the establishment of robust policies. Investment is also needed in the labor force, incorporating changes in labor policies and reinforcing labor rights, which has implications for the supply chain's efficiency. In the scenario where two factory owners find it easy and profitable to coordinate, they have a greater incentive to invest in such coordination.
However, forming a cartel is a specific strategy that involves collusion to control prices and output in the market, which may not always be legal or ethical. It's also important to note that this strategy goes beyond mere coordination of activities and ventures into market manipulation. In such a case, the firms would set a price that maximizes their combined profits and decide on the quantity of supply accordingly. The amount of profit the cartel earns would depend on the market demand and the costs associated with production and distribution.
Lastly, solving coordination problems and ensuring effective collaboration requires good faith negotiations and a willingness to find common ground and solutions that minimize transaction and conformity costs.