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NOSING OUT CARTELS
1
Author(s):
SMT. UMA DEVI S
Vol - 6, Issue- 1 ,
Page(s) : 339 - 351
(2015 )
DOI : https://doi.org/10.32804/IRJMSH
Abstract
A free market economy is an economy in which all firms will have equal opportunities for fair trade of goods and services. Such economies experience higher competition within their various industries which result in better quality products and lower prices. Competition policy when we say is to protect competition, not competitors . The terminology begins from the conception of free market devoid of monopoly & antagonistic trade violations ensuring fair competition and less argument. Maintenance of status quo in the contemporary trading techniques when proven obsolete have paved for the parallel competitive arrangements. Though competition is apparent, but the creation of new arrangements duly hinges bypassing of legal restraints by some, through anti competition. The term anti-competitive cartel usually refers to such practices which have as their objective to restrict the competition .
- ‘OECD: Policy Brief June 2006’<Http://Www.Oecd.Org/Competition/Mergers/37082099.Pdf>accessed 02 January 2015
- HFB Holdings V Commission T-9/99 [2002] E.C.R II 1487
- Gallop and Roberts, ‘Firm Interdependence in Oligopolistic Market’ [1979] 10 Journal Of Econometrics 313, 331
- Agreements between players to fix prices or to apportion customers or geographic market, or to confine production of a product by setting quotas amongst competitors or by any other means are considered to be cartel activities.
- Horizontal agreements include agreements regarding prices, quantities, bids, and market sharing.
- Vertical manacles on contest include tied selling, supply arrangements, distribution agreements, withdrawal from sale and resale pricing.
- Game theory is a useful tool for identifying ‘how & why firms and individuals make the decisions, and how these decisions affect others’. < http://economics.about.com/cs/studentresources/f/gametheory.htm>
- In the prisoner's dilemma game, two criminals must choose independently a strategy whether or not to inform, or "fink," on the co-conspirator. Because finking is the dominant strategy, the game demonstrates why there is no honor among thieves. The essence of the prisoner's dilemma is that the punishment of each prisoner is greater than that would have occurred. Guillermo Owen, Game Theory (1st Reprint, Academic Press 1982)133,129; Ian Ayres, ‘How cartels Punish: A Structural theory of Self-enforcing Collision’ (1987) 87 Colum. L. Rev 295
- ‘Economics of Cartel’ <www.tutor2u.net/blog/files/Collusion_Oligopoly.pdf> accessed 09 February 2015
- An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Oligopolies can result from various forms of collusion which reduce competition and lead to higher prices for consumers. Oligopoly has its own market structure. < Http://Www.Ftc.Gov/Bc/Edu/Pubs/Consumer/General/Zgen01.Shtm> accessed 08 February 2015
- In oligopoly, there is misallocation of wherewithal and consequent diminution of social welfare standards. Because all throughout a governing firm concludes the market price, distribution etc and other players in tacit complicity tag along the group to earn utmost profit. These are still hushing duress that undermines the proficiency of operation of market and it influences the trade, globally.
- Average total cost is the sum of all the production costs divided by the number of units produced; Pritanshu Shrivastava & Anurag Gupta, ‘Legal And Economic Review Of Cartels In Airline Industry -A Critical Analysis’ (2013) 1 CLC 6 <Http://Thismatter.Com/Economics/Firm-Production-And-Costs.Htm> Accessed 06 February 2015
- Pritanshu (n 12)
- The corporate will select a superior policy/ tactic based on the option made to it by the other player in a cartel is called Nash equilibrium. By lowering the prices the corporate may take revenge as punishment for failures of cartel obligations. This is a zero profit punishment and is an instance of Nash Equilibrium in pricing developed by Bertrand in 1847; J. Friedman, ‘Oligopoly and the Theory of Games’ (2nd, North-Holland Pub. Co.,1977) 38
- Bid rigging occurs when businesses, that would otherwise be expected to compete, secretly conspire to raise prices or lower the quality of goods or services for purchasers who wish to acquire products or services through a competitive bidding process. OECD, Guidelines for fighting bid rigging and public procurement <http://www.oecd.org/competition/cartels/42851044.pdf>
- Cartels are held as Hard Core Cartels where firms agree not to compete with each other thus injuring the punters by hiking prices and limiting supply, thus making goods and services absolutely unavailable to a number of purchasers and unreasonably expensive for others. The hard cores are usually rampant due to lack of timely detection and the consequences that too cannot be quantified.
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