Answer to Question #105209 in Microeconomics for Nhlaphu Mulaudzi

Question #105209
Questions:
1-what type of firm is the cartel?
2-what is a cartel?

NB:reference list (bibliography)
:citation (text reference)
1
Expert's answer
2020-03-12T02:47:36-0400

2-what is a cartel?

A cartel is a group of independent market participants who come together and join hands in order to improve their profit margin and dominate the market. These participants are mostly in the same sphere of business and therefore have a great impact in the industry. Most jurisdiction consider cartel behaviors us unfair competitive behavior. Some of their behaviors include bid rigging and price fixing

1-what type of firm is the cartel?

A cartel is a special case of oligopoly where competing firms in the market collude to interfere with the industry in their favor (Do, 2019). Cartels usually cause monopoly in the market hence high sales and increased profits (Eigruber & Wirl, 2019). Cartel can be created in any industry but it is most effective in an oligopoly where there are a small number of firms. Some of the types of cartels are joint profit maximization and market sharing cartel.

References

 Do, J. (2019). Imperfect Cartel With Self-Enforcing Transfer. Available at SSRN 3474218.

Eigruber, M., & Wirl, F. (2019). Cheating as a dynamic marketing strategy in monopoly, cartel and duopoly. Central European Journal of Operations Research, 1-18.



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