Cartel Agreement

The word cartel comes from the Italian word cartello, which means “sheet of paper” or “poster.” The Italian word became a cartel in the center of Franconia, borrowed from English. Its current use in the Mexican and Colombian world of drug trafficking comes from the Spanish cartel. In English, the word was originally used for a written agreement between the warring nations to regulate the treatment and exchange of prisoners. [1] There is an agreement when companies agree to act together instead of competing. This agreement aims to increase the profits of cartel members while maintaining the illusion of competition. Agreements have a negative impact on consumers because their existence leads to higher prices and limited supply. The Organisation for Economic Co-operation and Development (OECD) has made the detection and continuation of cartels one of its priority policy objectives. It identified four main categories that define the behaviour of cartels: pricing, production restrictions, market distribution and bid manipulation (submission of collusive bids). The agreements are due to the consumer by the fact that their activities are aimed at raising the price of a product or service above the market price. However, their behaviour has a negative effect in another way.

Agreements discourage new entrants and act as a barrier to entry. The lack of competition due to the price agreement leads to a lack of innovation. Two or more companies agree to share the market with each other and not operate in each other`s sectors. This can be a geographical distribution, a breakdown by category of customers, etc. Market-sharing agreements can be manifested as follows: an agreement is a group of producers working together to protect their interests. Agreements arise when some large producers decide to cooperate on aspects of their market. Once created, agreements can set prices for members, avoiding price competition. In this case, the agreements are also called price circles. They can also limit productions on the market, for example.

B with OPEC and oil exploitation rates, and establish rules on other aspects of members` behavior. The definition of rules is particularly important in oligopolistic markets, as predicted in game theory.