Cartel

In economics, a cartel is a group of formerly independent companies who overtly agree to work together. The objectives of cartels are to increase their profits or to stabilize market sales. They do this by fixing the price of goods, by limiting market supply or by other means. Monopolies are not cartels, because in a monopoly there is only one independent company. Cartels are bad for the economy in general and for their customers who are overcharged. Cartels usually occur in oligopolies, where there are a small number of players that control the majority of supply in a market.

Besides the sellers' cartel just described, buyers may also form cartels to suppress the price of a purchased input. Another type of cartel is the bidding ring. In bid rigging potential suppliers form an agreement as to which of them will win a supply contract at a price above the competitive price and, if one of them wins, then agree to a rule for sharing the extra profits among themselves. Bid rigging is most common among construction firms trying to get a government building project.