Hard Core Cartels


A hardcore cartel is an agreement on market division and on quantity restriction which hamper competition directly. Cartels usually occur in oligopolistic industries, involving homogeneous products. As cartel members may agree on matters such as price fixing, total industry output, market shares, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies, or allocation of profits, this kind of agreements lead to increased market power and give rise to expressive prices, inefficient quantities, inefficient reallocation of economic surplus (from consumers to producers), and reduced incentives to produce efficiently.
Hardcore cartels reduce the total welfare and consumers' surplus because of higher prices and/or inferior quality of services.
The difficulty consists in deciding if, and under which conditions, the positive effects of an agreement exceed the negative effects of constrained competition, as this is often the decisive issue for competition authorities to decide whether to undertake a further analysis or not.

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