cartel theory

Cartel theory describes how groups of independent firms or organizations collude to coordinate their activities, typically to control prices, limit competition, and increase profits. By acting together as a cartel, they can emulate a monopoly, setting production levels and prices to maximize collective gains rather than competing against each other. This coordination often involves agreements or practices like fixing prices, dividing markets, or restricting supply. While cartels can be highly profitable for members, they generally harm consumers and the economy by reducing choice and increasing prices. Regulatory measures aim to prevent or dismantle such collusive arrangements to promote fair competition.