Cartel Price

Cartel Price

 

a uniform monopoly price fixed by members of a domestic cartel by mutual agreement; once the price is set, individual companies belonging to the cartel are not permitted to undercut it. In cases where many different products are produced by cartel members, the cartel price may take the form of a uniform scale of prices for all products that are subject to cartel regulation.

Cartel prices ordinarily are much higher than the prices that preceded the cartel agreement. Since they are intended to ensure an average profit to the least efficient company among the cartel members, the other cartel members receive a monopoly profit whose size is determined by the difference between their production costs and the production costs of the least efficient member. Cartel price regulation is possible only through combined limitation of production and sales. The cartel price is determined by a number of factors, including the possibility of eliminating outsiders or including them in the cartel; the lack of competition from substitute products that consumers could switch to; and the absence of forces that would undermine the cartel from within (for example, through secret discounts below the established price). The cartel price is one of the most obvious forms of the monopoly price; in many cases, it leads to prolonged retardation of technical progress in the cartel-controlled sector.

IU. B. KOCHEVRIN

References in periodicals archive ?
inflated cartel price. (2) Congress enacted the Sherman Act based on the
(17) Generally, unless the charging of a cartel price is also a breach of an express or implied term in a contract between the claimant and the defendant, the cause of action arises in tort.
First, they may expand their output to some extent in response to the higher cartel price. Second, they may hold their output constant at the preconspiracy level and raise their prices to the cartel level.
If a firm's cartel partners are cheating on the price-fixing agreement, then the worst thing that a firm can do is to honor the agreement by continuing to charge the cartel price, while losing one's customers to firms charging less than the cartel price.
It would be more difficult for the firms to agree on a cartel price after the tariff was levied, since prices were not uniform to begin with, and the tariff affects each firm differently.
Quantitative studies of cartel price effects uniformly attribute very substantial (if differing) overcharges or price increases to most cartels that have been detected.
Marshall et al., Cartel Price Announcements: The Vitamins Industry, 26 INT'L J.
Privatisation was said to make them competitive suppliers, But cartel price fixing suggests that there maybe some liars.
With a cartel price [P.sup.*], the illicit gain is equal to the area A minus the area C, which represents the profit margin lost on consumers who no longer purchase the good at the increased price.
Individual company, by reducing its price just a little (slightly below the cartel price), may sell more, "0[Q.sub.d]" at the same expenses as other members.
(81) The worst result would be to replace a cartel with a monopolist, so that the unlawful cartel price is replaced by a monopoly price.
Thus to eliminate incentive to cheat, cartel price should depict some amount of rigidity in a case of market shrinking.