Posted in Finance, Accounting and Economics Terms, Total Reads: 645
A Cartel is an agreement where a group of competing firms in an industry/sector come together to set Output levels & Prices in the market. This is generally seen in an Oligopolistic market where there are few firms but each having a significant market share. The objective of a cartel agreement is to mitigate competition and thus improve profits.
Example of cartel at international level is Organisation of Petroleum Exporting Countries (OPEC). Here the members from these nations meet regularly and fix the amount of crude oil to be produced by each one of them.
In many Western countries like US & in Europe, cartel is forbidden because in most of the cases it goes against the interest of the end-consumer.