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What are the gains associated with formation of cartel by producers?

August 27, 2010

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A cartel is a formal agreement among competing firms. Manufacturers of a certain product may fix prices, production output or allocate customers in order to increase members' profits by reducing competition. Setting common prices allows monopoly pricing of their products, therefore cartels are favorable for producers and harmful for free competition.

A cartel agreement can be concluded if there is a small number of manufacturers and their products are homogeneous.

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