What is Cartel?
In [[economics]], a '''cartel''' is a group of formerly independent [[company|companies]] who overtly agree to work together. The objectives of cartels are to increase their [[profit]]s or to stabilize market sales. They do this by fixing the [[price]] of [[goods]], by limiting market [[supply]] or by other means. [[Monopoly|Monopolies]] are not cartels, because in a monopoly there is only one independent company. Cartels are bad for the economy in general and for their customers who are [[overcharge]]d. Cartels usually occur in [[oligopoly|oligopolies]], where there are a small number of players that control the majority of supply in a market. Besides the sellers' cartel just described, buyers may also form cartels to suppress the price of a purchased input. Another type of cartel is the '''bidding ring'''. In bid rigging potential suppliers form an agreement as to which of them will win a supply contract at a price above the competitive price and, if one of them wins, then agree to a rule for sharing the extra profits among themselves. Bid rigging is most common among construction firms trying to get a government building project. == Overview == :''People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.'' :''[[Adam Smith]], [[The Wealth of Nations]]'', [[1776]] A survey was done of hundreds of published economic studies and legal decisions of antitrust authorities. It found that the [[median]] price increase achieved by cartels in the last 200 years is 25%. Private international cartels (those with participants from two or more nations) had an average price increase of 28%. Domestic cartels averaged 18%. Less than 10% of all cartels in the sample failed to raise market prices. In general, cartel agreements are difficult to negotiate because potential members typically have different ideal collusive prices. Once formed, cartels tend to be [[economics|economically]] unstable, prima