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LIMIT PRICING: The strategic behavior process in which a firm with market control sets its price and output so that there is not enough demand left for another firm to enter the market and earn profits. The firm expands its output causing the price to fall, which discourages potential entrants to this market. This practice is most commonly undertaken by oligopoly firms seeking to expand their market shares and gain greater market control.
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                           CARTEL: A formal agreement between businesses in the same industry, usually on an international scale, to gain market control, raise the market price, and otherwise act like a monopoly. The most famous international cartel is the Organization of Petroleum Exporting Countries (OPEC), which seeks to exert control over the world oil market. Other cartels have existed, or still exist, in the global markets for uranium, diamonds, long distance telephone services, and airlines. A cartel is a formal arrangement by firms in industry that is designed to monopolize the market. It is most often seen on an international scale where the "firms" are actually governments of individual countries that control the production of a good or resource. A cartel is an example of explicit collusion.The most noted example of a cartel, international or otherwise, is the Organization of Petroleum Exporting Countries (OPEC). OPEC is an international organization of more than a dozen nations, primarily located in the Middle East, but also in Africa and Central America, that controls a sizeable portion of the world's petroleum reserves. This control of reserves gives it a great deal of influence over the petroleum market. However, other lesser known international cartels exist or have existed recently in the markets for steel, uranium, assorted chemicals, international long distance telephone service, and international air transportation. International cartels come in three varieties: - Private Firm Cartel: This form of cartel includes two or more private firms from two or more different countries that seek to control the market for a particular good. This market can be domestic or foreign. A private firm cartel epitomizes secretive explicit collusion among firms. Such cartels are inevitably illegal and are often prosecuted by domestic law enforcement agencies.
- Export Cartel: This type of a cartel includes two or more private firms in a particular county, often an industrial trade group, that seek to control the exports to, and markets in, another country or other countries. These cartels are often exempt from domestic antitrust laws and might even be encouraged by domestic governments.
- Government Cartel: This form of cartel is exemplified by OPEC and includes the governments of two or more countries that seek to control the market for a particular good. These cartels, like most international organizations, often seek multiple economic, political, and social objectives. That is, they might not control the market exclusively for profit and economic gain, but maybe to gain political favor from other countries.
Whatever form a cartel takes, like any collusive arrangement it is susceptible to instability. A cartel tends to be unstable because the artificially high price that it sets gives each member of the cartel an incentive to "cheat" by offering a slightly lower price. If only one member of the cartel sells at a lower price, then it can make oodles of extra profit by taking customers away from the other members. If all members of the cartel cheat, then the cartel falls apart, at least until cartel authority is reestablished.Some cartels are able to prevent member cheating and maintain market control for extended periods (decades or even centuries). Other cartels are less successful and fall apart over a shorter time span.
 Recommended Citation:CARTEL, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: July 1, 2025]. Check Out These Related Terms... | | | | | | | | Or For A Little Background... | | | | | | | | | | | | | And For Further Study... | | | | | | | | | | | |
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Today, you are likely to spend a great deal of time calling an endless list of 800 numbers looking to buy either a battery-powered, rechargeable vacuum cleaner or a remote controlled World War I bi-plane. Be on the lookout for mail order catalogs with hidden messages. Your Complete Scope
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Francis Bacon (1561-1626), a champion of the scientific method, died when he caught a severe cold while attempting to preserve a chicken by filling it with snow.
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