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Cartel Formation
The process by which firms in an oligopoly collude to control prices and output, effectively acting like a monopoly; often illegal under antitrust laws.
Implications
The illegal collaboration between companies within the same industry to control prices, limit production, or restrict competition, often leading to higher prices for consumers and reduced market efficiency.
Example
Example: Several oil companies are investigated for cartel formation after evidence suggests they have been colluding to set prices and control the supply of oil in the market.
Related Terms
Different from legal industry associations, which may collaborate on standards or advocacy, cartels are illegal and involve anti-competitive behavior.
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