Cartel vs Oligopoly
Cartel and Oligopoly are two Market Structures concepts in AP Economics that students often mix up. In short: cartel is a cartel is a group of firms that collude to restrict competition and increase profits by acting as a single monopolist. Meanwhile, oligopoly is an oligopoly is a market structure dominated by a small number of large interdependent firms. Here is how they compare side by side.
A cartel is a group of firms that collude to restrict competition and increase profits by acting as a single monopolist.
Cartels are agreements between firms to coordinate their actions, such as fixing prices or limiting production, to reduce competition. By acting together, the cartel members can behave like a single monopolist and earn higher profits. Cartels are often illegal.
An oligopoly is a market structure dominated by a small number of large interdependent firms.
Firms in an oligopoly are mutually aware of each other’s actions and often engage in strategic behavior, such as price leadership or collusion. High barriers to entry limit competition and can lead to sustained economic profits.
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