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Cartels<br />Good or bad for society<br />20-Jan-10<br />1<br />
What is cartel<br />Explicit agreements to set output and price<br />May not include all firms<br />Cartels usually occur ...
Why cartels form ?<br />cartel <br />20-Jan-10<br />3<br />
Firms form a cartel so that they can raise<br />Profits<br />20-Jan-10<br />4<br />
They earn greater profit by coordinating their activities rather than acting independently<br />20-Jan-10<br />5<br />
Conditions for cartel success<br />20-Jan-10<br />6<br />   Low organizational costs<br />   Cartel controls market<br /> ...
Types of cartel<br />20-Jan-10<br />7<br />
20-Jan-10<br />8<br />
Cartel members may agree on…!<br />Division Of Profits<br />Price Fixing<br />Allocation Of Customers<br />Total Industry ...
Why Cartels often fail ?<br />firms don't cooperate due to a lack of trust<br />Firms “cheat”<br />Produce extra output (o...
Cartels: Bad for society ?<br />Raises prices <br />Restricts supply<br />Makes goods and  services completely unavailable...
What Are the Optimal Price,<br />Quantity, and Quota Allocation?<br />20-Jan-10<br />12<br />
Detecting Cartels<br />20-Jan-10<br />13<br />
20-Jan-10<br />14<br />
20-Jan-10<br />15<br />
Examples<br />Cartel of twelve countries <br />Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi ...
Incentives to cheat
Enforcement requires detection and effective penalties.</li></ul>20-Jan-10<br />16<br />
2. Christie’s and Sotheby’s<br />Christie's is a leading art business and a fine arts auction house.<br />Sotheby's is the...
20-Jan-10<br />18<br />
4. Seven Sisters (oil companies)<br />Refers to seven oil companies that dominated mid 20th century oil production, refini...
Examples of unsuccessful cartels<br />20-Jan-10<br />20<br />
Cartels in India<br />20-Jan-10<br />21<br />
Conclusion<br /><ul><li>Cartels have inherent characteristics to adversely affect the economy.
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Cartels-Good or bad for society

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Cartels-Good or bad for society

  1. 1. Cartels<br />Good or bad for society<br />20-Jan-10<br />1<br />
  2. 2. What is cartel<br />Explicit agreements to set output and price<br />May not include all firms<br />Cartels usually occur in an oligopolistic industry<br />20-Jan-10<br />2<br />
  3. 3. Why cartels form ?<br />cartel <br />20-Jan-10<br />3<br />
  4. 4. Firms form a cartel so that they can raise<br />Profits<br />20-Jan-10<br />4<br />
  5. 5. They earn greater profit by coordinating their activities rather than acting independently<br />20-Jan-10<br />5<br />
  6. 6. Conditions for cartel success<br />20-Jan-10<br />6<br /> Low organizational costs<br /> Cartel controls market<br /> Cheating can be detected and prevented<br /> Low expectation of severe government punishment<br />
  7. 7. Types of cartel<br />20-Jan-10<br />7<br />
  8. 8. 20-Jan-10<br />8<br />
  9. 9. Cartel members may agree on…!<br />Division Of Profits<br />Price Fixing<br />Allocation Of Customers<br />Total Industry Output<br />Allocation Of Territories<br />Market Shares<br />Bid Rigging<br />20-Jan-10<br />9<br />
  10. 10. Why Cartels often fail ?<br />firms don't cooperate due to a lack of trust<br />Firms “cheat”<br />Produce extra output (or lower the price)<br />20-Jan-10<br />10<br />
  11. 11. Cartels: Bad for society ?<br />Raises prices <br />Restricts supply<br />Makes goods and services completely unavailable<br />20-Jan-10<br />11<br />
  12. 12. What Are the Optimal Price,<br />Quantity, and Quota Allocation?<br />20-Jan-10<br />12<br />
  13. 13. Detecting Cartels<br />20-Jan-10<br />13<br />
  14. 14. 20-Jan-10<br />14<br />
  15. 15. 20-Jan-10<br />15<br />
  16. 16. Examples<br />Cartel of twelve countries <br />Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.<br /><ul><li>Mechanism for implementing production restrictions.
  17. 17. Incentives to cheat
  18. 18. Enforcement requires detection and effective penalties.</li></ul>20-Jan-10<br />16<br />
  19. 19. 2. Christie’s and Sotheby’s<br />Christie's is a leading art business and a fine arts auction house.<br />Sotheby's is the world's third oldest auction house in continuous operation.<br />20-Jan-10<br />Involved in price-fixing arrangement to form Cartel<br />17<br />
  20. 20. 20-Jan-10<br />18<br />
  21. 21. 4. Seven Sisters (oil companies)<br />Refers to seven oil companies that dominated mid 20th century oil production, refining, and distribution<br />According to a report, 56 per cent of cartel complaints relate to the petrol sector.<br />20-Jan-10<br />19<br />
  22. 22. Examples of unsuccessful cartels<br />20-Jan-10<br />20<br />
  23. 23. Cartels in India<br />20-Jan-10<br />21<br />
  24. 24. Conclusion<br /><ul><li>Cartels have inherent characteristics to adversely affect the economy.
  25. 25. The artificial price rise seen in the cartel cases, endorses this fact.
  26. 26. The ultimate victims of cartelization are the consumers and the business houses.</li></ul>20-Jan-10<br />22<br />
  27. 27. Thank You<br />20-Jan-10<br />23<br />
  28. 28. 20-Jan-10<br />24<br />

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