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2015 | OriginalPaper | Buchkapitel

2. Cartel Occurrence and Operation in Market

verfasst von : Jurgita Bruneckienė, Irena Pekarskienė, Andrius Guzavičius, Oksana Palekienė, Jūratė Šovienė

Erschienen in: The Impact of Cartels on National Economy and Competitiveness

Verlag: Springer International Publishing

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Abstract

Profit seeking actions of undertakings often depend on the structure of the market in which they operate. Although economic theories usually distinguish among four types of market structures—perfect competition, monopoly, oligopoly and monopolistic competition, two of them appear to be more common in practice, i.e. oligopoly and monopolistic competition. By its characteristics, monopolistic competition is closer to the perfect competition model, while oligopoly is more similar to monopoly. In oligopolistic markets, firms very frequently start operating in an interdependent manner in order to maximise their profits and thus form cartels. It is namely the oligopolistic market in which several firms, even occupying small market shares, are in a position of controlling a large market share, i.e. joint collective actions enable maximising the generated profits. In addition, in markets with a small number of players, the market players are well aware that pricing or output decisions taken independently by every firm have a direct influence on the profits of all competitors. Therefore, both theoretical and empirical studies have proved that cartels are most commonly seen in the oligopolistic markets. For that reason, analyses of collective corporate actions and modelling of effects thereof have been extensively integrated into and supplemented the theory of oligopolistic markets.

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Fußnoten
1
The author equated the cartel definition with a secret collusion, conspiracy and collaboration.
 
2
Elimination from a market is an acceptable strategy in cases when new firms willing to join a cartel (which is already active and market shares are already distributed between cartel members equally to their pre-cartel levels) seek to have a market share equal to the share they held while being outside. However, if there is a market distribution agreement entailing non-redistribution and non-reconsideration of market shares, there appears an additional stimulus to eliminate non-cartel firms from the market in order to ensure cartel stability and avoid frictions within the cartel.
 
3
The government identified in the model influences cartels mainly through anti-competitive policy and tax system.
 
4
Annual Report of the Lithuanian Competition Council (2008), p. 9.
 
5
Annual Report of the Lithuanian Competition Council (2005) p. 7.
 
6
Annual Report of the Lithuanian Competition Council (2011), p. 12.
 
7
Annual Report of the Lithuanian Competition Council (2009), p. 24.
 
8
Annual Report of the Lithuanian Competition Council (2011), pp. 37–38.
 
9
Levenstein and Suslow (2006) note that even though cartel members never cheat and the cartel never breaks down, the cartel price fluctuates in response to shocks to demand.
 
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Metadaten
Titel
Cartel Occurrence and Operation in Market
verfasst von
Jurgita Bruneckienė
Irena Pekarskienė
Andrius Guzavičius
Oksana Palekienė
Jūratė Šovienė
Copyright-Jahr
2015
DOI
https://doi.org/10.1007/978-3-319-17287-3_2