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Economics
Clouds

What best describes a cartel?

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01/27/2015

A cartel is a group of firms who collude together for the purpose of avoiding a competitive market in order to create economy profit for themselves. A real life example of a cartel is OPEC (Organization of Petroleum Exporting Countries). Theoretically cartels are very unstable because they are an informal agreement to collude: to sell at a higher price together, rather than compete down the price. It is very unstable because there is no binding agreement that one of the firms will not undersell the other and capture the entire market share.

Cartels are a classic example of game theory that describes the prisoner's dilemma.
A cartel is a collection of businesses or countries that act together as a single producer and a fundamental economic concept that describes the total amount.