What Is An Agreement Among Firms To Charge One Price For The Same Good Called Answers.com

It is useful to distinguish the associated ideas of market behavior and performance. Market behavior refers to the pricing and other market policies pursued by sellers, both in terms of objectives and how they coordinate their decisions and make them compatible with each other. Market performance refers to the final results of this policy – the ratio of selling price to cost, size of production, efficiency of production, progressivity of techniques and products, etc. A cartel is an agreement between competing companies to work together in order to make higher profits. Cartels usually occur in an oligopolistic industry where the number of sellers is small and the products traded are homogeneous. The members of the cartel can agree on these issues: price fixing, total industry production, market share, distribution of customers, allocation of territories, tendering agreements, creation of joint sales agencies and profit sharing. Several factors deter collusion. First, pricing is illegal in the United States, and antitrust laws are in place to prevent collusion between companies. Secondly, coordination between companies is difficult and the more companies are involved. Third, there is a threat of overflow.

A company can agree to enter into agreements and then break the agreement, thus jeopardizing the profits of companies that still keep the agreement. Finally, a company can be deterred from collusion if it is not able to effectively punish companies that might break the agreement. In the competitive market, each company is so small compared to the market that it cannot influence the price of its product and therefore accepts the price as dictated by market conditions. In a monopolized market, a single firm supplies the entire market for a good, and that firm can choose any price and quantity on the market demand curve. Competition and monopoly are extreme forms of market structure. Nevertheless, many industries have competitors, but at the same time are not so strong in competition that they are price buyers. Economists call this situation imperfect competition. A certain type of it is called an oligopoly. The essence of an oligopolistic market is that there are few sellers.

As a result, the actions of one seller in the xan market have a great impact on the profits of all other sellers. That is, oligopolistic enterprises are interdependent in a way that competitive enterprises are not. A cartel is a formal agreement between companies with the aim of increasing their profits. .

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