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| Basic concepts |
| Anti-competitive practices |
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| Enforcement authorities and organizations |
A cartel is a group of independent market participants who collude with each other as well as agreeing not to compete with each other[1] in order to improve their profits and dominate the market. A cartel is an organization formed by producers to limit competition and increase prices by creating artificial shortages through low production quotas, stockpiling, and marketing quotas. Cartels can be vertical or horizontal but are inherently unstable due to the temptation to defect and falling prices for all members.[2]
Additionally, advancements in technology or the emergence of substitutes may undermine cartel pricing power, leading to the breakdown of the cooperation needed to sustain the cartel. Cartels are usually associations in the same sphere of business, and thus an alliance of rivals. Most jurisdictions consider it anti-competitive behavior and have outlawed such practices. Cartel behavior includes price fixing, bid rigging, and reductions in output. 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.[3]
Examples of domestic cartels include the United States Gunpowder Trade Association (which was dissolved by U.S. courts in 1912) and the National Collegiate Athletic Association which restricts the kind of compensation that collegiate athletes can receive.[4][5][6] Examples of international cartels include the OPEC cartel to collude on oil production and the International Rubber Regulation Agreement to collude on rubber production.
- ^ api_import (2024-02-22). "What is a cartel?". comcom.govt.nz. Retrieved 2024-04-12.
- ^ Colgan, Jeff D. (2021). "The Stagnation of OPEC". Partial Hegemony: Oil Politics and International Order. Oxford University Press. pp. 94–118. doi:10.1093/oso/9780197546376.001.0001. ISBN 978-0-19-754637-6.
- ^ Margaret C. Levenstein and Valerie Y. Suslow, "What determines cartel success?." Journal of economic literature 44.1 (2006): 43-95 online.
- ^ Sanderson, Allen R.; Siegfried, John J. (March 1, 2018). "The National Collegiate Athletic Association Cartel: Why it Exists, How it Works, and What it Does". Review of Industrial Organization. 52 (2): 185–209. doi:10.1007/s11151-017-9590-z. ISSN 1573-7160. S2CID 86850372.
- ^ Blair, Roger D.; Whitman, Joseph (March 1, 2017). "The NCAA Cartel, Monopsonistic Restrictions, and Antitrust Policy". The Antitrust Bulletin. 62 (1): 3–14. doi:10.1177/0003603X16688836. ISSN 0003-603X. S2CID 157372084.
- ^ Humphreys, Brad R.; Ruseski, Jane E. (2009). "Monitoring Cartel Behavior and Stability: Evidence from NCAA Football". Southern Economic Journal. 75 (3): 720–735. doi:10.1002/j.2325-8012.2009.tb00928.x. ISSN 0038-4038. JSTOR 27751412. S2CID 44035483.