Cartels vs Oligopolies

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  • Created by: kingzai
  • Created on: 09-10-18 21:04

Cartels vs Oligopolies

Similarities

  • In both situations, it is difficult for new firms to enter the market because incumbent firms are enjoying economies of scale.

Differences

  • Definition: A cartel is an explicit, formal agreement between firms in an industry to fix price and production quantity while oligopoly is an economic market condition where numerous sellers have their presence in one single market. A small number of large firms dominate the industry.
  • Prices: Cartel prices are usually high while those in oligopoly are moderate due to the competition
  • Sources of power: Cartels get their power from the explicit agreement between dominant members of the market where firms in oligopoly gain power from the lack of competition

Overall comparison

Cartels can occur in any market, but mainly in oligopolies. They are a special case of oligopoly where competing firms in an industry collude to create formal, explicit agreements to fix prices and production quantities.-By Zai and Riya

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