cartel
Sign in to saveA cartel is a group of independent market participants who collaborate with each other and avoid competing with each other in order to improve their profits and dominate the market. They seek to limit competition, fix prices, and increase prices by creating artificial shortages through low production quotas, stockpiling, and marketing quotas. Jurisdictions frequently consider cartelization to be anti-competitive behavior, leading them to outlaw or curtail cartel practices. Anti-trust law targets cartel behavior in markets.
AI overview
A cartel is a group of independent businesses that work together to avoid competing with each other, instead coordinating actions like fixing prices and limiting production to boost their profits and control the market. Cartels are considered anti-competitive and illegal in most jurisdictions because they harm consumers by artificially raising prices and reducing choice.
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Article
14 sectionsContents
- Etymology
- History
- Types
- Effects
- Organization
- Cartel theory versus antitrust concept
- Legislation and penalties
- Leniency programmes
- Price fixing
- Examples
- See also
- References
- Bibliography
- External links
A cartel is a group of independent market participants who collaborate with each other and avoid competing with each other in order to improve their profits and dominate the market. They seek to limit competition, fix prices, and increase prices by creating artificial shortages through low production quotas, stockpiling, and marketing quotas. Jurisdictions frequently consider cartelization to be anti-competitive behavior, leading them to outlaw or curtail cartel practices. Anti-trust law targets cartel behavior in markets.
The doctrine in economics that analyzes cartels is cartel theory. Cartels are distinguished from other forms of collusion or anti-competitive organization such as corporate mergers. Cartels are inherently unstable due to the temptation by members of the cartel to cheat and defect on each other by improving their individual profits, which may lead to falling prices for all members. Advancements in technology or the emergence of substitutes can undermine cartel pricing power, leading to the breakdown of the cooperation needed to sustain the cartel. Outside actors often respond to the undersupply of a good by bolstering their production of the good, investing in technologies that use the good more efficiently, or investing in substitutes.