08S7B trailblazers

Cartels & Why They're Set Up

I think there's lots to learn from this video :) It sure explains a lot about the formation of cartels & the considerations that the government & other organisations take when dissolving cartels. Perhaps more to consider when writing about oligopolies & monopolies! It's a little different because he's working with a horizontal MC, but that's a assumption that makes everything easier.

Cartels only really work when everyone's working together and there's a pretty small group so they can enjoy the supernormal profits more. But the lure of undercutting the agreement is really huge and with the number of people increasing, the share of profit gets smaller and it gets much harder to police.

This should apply to most other cartels. With the OPEC, though, I don't really see how the product's differentiated but with the power they yield and market share they hold they're pretty powerful. They can enjoy the benefits of working as a cartel & having their slice of the pie. It's beneficial to all producers (but really in this case not consumers!) and with the OPEC they actually work together.

I think a cartel's a pretty clear-cut case for when monopoly's NOT beneficial to the consumers because they're really going to be cutting down output for the sake of raising up prices and maximising their profits. But they are beneficial for the welfare of the workers in the company if the profits mean good wages for the staff. So it might have some benefit after all!

I find that there are lots of these cool videos on Youtube :) You can check out the channel that this is on for other really helpful videos.

- Lim Yu

posted by Fishie @ 11:25 PM