Difference between revisions of "Cartel"
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| − | A '''cartel''' is an group of companies in a particular industry who agree not to undercut each other in prices and carve up the market territory. They restrict the amount of output they produce to stabilize prices and maintain profit margins. | + | A '''cartel''' is an group of companies in a particular industry who agree not to undercut each other in prices and carve up the market territory. They restrict the amount of output they produce to stabilize prices and maintain profit margins. The net result is an [[oligopoly]]. The aim of such [[collusion]] is to stabilize and increase prices and profit by reducing competition. |
Identifying and breaking up cartels is an important part of the competition policy overseen by [[antitrust laws]] in most countries, although proving the existence of a cartel is rarely easy, as firms are usually not so careless as to put agreements to [[collude]] on paper. The desire to form cartels is strong; however, most cartels are unstable. | Identifying and breaking up cartels is an important part of the competition policy overseen by [[antitrust laws]] in most countries, although proving the existence of a cartel is rarely easy, as firms are usually not so careless as to put agreements to [[collude]] on paper. The desire to form cartels is strong; however, most cartels are unstable. | ||
Revision as of 06:22, August 9, 2018
A cartel is an group of companies in a particular industry who agree not to undercut each other in prices and carve up the market territory. They restrict the amount of output they produce to stabilize prices and maintain profit margins. The net result is an oligopoly. The aim of such collusion is to stabilize and increase prices and profit by reducing competition.
Identifying and breaking up cartels is an important part of the competition policy overseen by antitrust laws in most countries, although proving the existence of a cartel is rarely easy, as firms are usually not so careless as to put agreements to collude on paper. The desire to form cartels is strong; however, most cartels are unstable.
OPEC is one example of a large global cartel; if one member of the cartel breaks the agreement on price fixing, it's not just an oil company that risks bankruptcy in a price war, but a whole country.
The 21st century saw a rise in illegal drug and human slavery cartels, particularly in Mexico.