An Analysis on Cartel

Running Head: AN ANALYSIS ON CARTEL
An Analysis on Cartel
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1AN ANALYSIS ON CARTEL
Table of Contents
Introduction......................................................................................................................................2
Market Structure of Automotive bearing.........................................................................................2
Symptoms of Collusive behavior.....................................................................................................3
Collusion on oligopoly....................................................................................................................3
Incentive of the companies in cartel formation...............................................................................4
Welfare consequence of cartels.......................................................................................................5
Cost and benefit of government control..........................................................................................6
Conclusion.......................................................................................................................................7
References........................................................................................................................................8

2AN ANALYSIS ON CARTEL
Introduction
Cartel is a form of collusive oligopoly. The dominating firms in an oligopoly market
engages in the cartel agreement and take mutual decision regarding price and output. The paper
discusses case study related to behavior of automotive bearing companies. Now a day, formation
if cartels has become a prominent feature of many industries. Cartel provides firms opportunity
for earning a higher profit and revenue by charging a higher price than it is otherwise be. As
cartel behaves like a monopoly there is a social welfare loss (Jacobides, MacDuffie & Tae,
2016). Government intervene with the tool of competitive policy to enhance efficiency in the
market. In case of infringement, the commission charges penalties or fines to the cartel
participants.
Market Structure of Automotive bearing
Bearings refer to machine parts that have elements of rolling which are used in rotating
arts of automobiles like cars, truck and other components related to automotive. Classification of
market structure is based on several attributes. Number of buyers and sellers signal the specific
form of market structure (Salim, Islam & Bloch, 2015). Competitive market is one where
numerous buyers and sellers compete in the market place. As against this in an imperfectly
competitive market structure there are imperfect knowledge among market participants with
sellers enjoy some degree of market power. Monopoly, oligopoly and monopolistic competition
are the three forms of imperfectly competitive market structure.
Oligopoly is a form of imperfectly competitive market characterized by dominance of
few large firms. The few firms serve a large number of customers. Because of a relatively small
number of firms, each firm enjoys a significant control over the market (Gomez-Martinez,