An agreement between two or more firms in the same industry to fix prices at a high level or to restrict output in an effort to increase profits by reducing competition. Members of cartels face a strong incentive to break the agreement by lowering prices in order to undercut other members, thereby gaining all the profit. They are also threatened by new entrants into the market who could undercut the prices of the cartel. Consequently, it is rare to find a stable cartel in a free-market system economy.
The Truth About Monopolies and Anti-Trust Laws
Mark Hendrickson - Monopoly and Anti-Trust
Bootleggers, Baptists and Climate Change
OCTOBER 05, 2009 by BRUCE YANDLE
Industry support of legislation that imposes restrictions on output is commonplace, but one begins to understand this more fully after careful scrutiny of the lobbying process.
Related Freeman Articles
NOVEMBER 16, 2012 by MAX BORDERS
It's important that libertarians develop Kirznerian alertness to these kinds of opportunities. What monolithic, cross-subsidized state-sanctioned beast can I disrupt with innovation today?