ANSWERS: 2
  • A cartel agreement is when producers of a product, such as oil, agree to set prices and production levels that provide a mutual advantage to the producers of the product.

    Function

    Cartel agreements serve to control the price of a product on the open market. This helps to ensure fair pricing for distributors of the product.

    Potential

    A company that is producing a product without a cartel agreement can control and inflate the pricing of a product as it sees fit.

    Legality

    Cartel agreements can be illegal depending on the terms of the agreement and the country where the agreement was made. In the United States, cartel agreements must adhere to antitrust (monopoly) laws.

    Considerations

    A cartel agreement is unlikely to be effective if the producers of the product covered under the terms of the agreement do not control a majority market share of the product.

    Fun Fact

    Cartel agreements can be formed around any product that has value in the commercial marketplace, as long as they follow the laws in their jurisdiction.

    Source:

    Auburn University: Cartels

    Yale University: How Cartels Punish

    United Kingdom Department For Business Innovation and Skills

    More Information:

    Cornell University: Antitrust Law

  • In economics, a cartel is an agreement between competing firms to control prices or exclude entry of a new competitor in a market. It is a formal organization of sellers or buyers that agree to fix selling prices, purchase prices, or reduce production using a variety of tactics. Money Classic Research

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