Author
Home > Business > What is the Difference Between Cartel and Monopoly?

Guilherme Mazui

•4 minutes to read

What is the Difference Between Cartel and Monopoly?

🆚 Go to Comparative Table 🆚

The main difference between a cartel and a monopoly lies in the number of entities involved and the nature of their control over the market.

A monopoly is a market structure where a single company or entity controls the entire market for a particular product or service, effectively eliminating competition. Monopolies often result from historical development or corporate mergers, and they can be either legal or illegal, depending on the jurisdiction and the specific market conditions.

A cartel, on the other hand, is a group of independent businesses or organizations that collude to manipulate the market for a particular product or service. Cartel members agree on various aspects, such as prices, total industry output, market shares, allocation of customers, allocation of territories, and the division of profits. Cartels are generally considered illegal in most parts of the world due to their anti-competitive nature and the harm they cause to consumers through increased prices and lack of transparency.

In summary:

  • Monopolies have only one dominant player controlling the entire market for a particular product or service.
  • Cartels are formed by a group of individuals, organizations, or producers/suppliers of a particular product or service, with the aim of controlling production and manipulating prices.
On this page
  • What is the Difference Between Cartel and Monopoly?
  • Comparative Table: Cartel vs Monopoly

    • Comparative Table: Cartel vs Monopoly

    Here is a table comparing the differences between a cartel and a monopoly:

    Aspect Cartel Monopoly
    Definition A cartel is an organization created between a group of producers to regulate supply and manipulate prices. A monopoly is a single firm that dominates a particular industry or market.
    Market Structure A cartel consists of a small number of competitors who work together to keep prices high and restrict output. A monopoly is characterized by a single firm that has complete control over the market, often resulting from economies of scale.
    Collusion Cartel members agree on prices, total industry output, market shares, allocation of customers, allocation of territories, and the division of profits. A monopoly does not collude with other firms, as it is the sole provider of a product or service in the market.
    Legality Cartels are generally considered anti-competitive and are often subject to anti-trust legislation, such as the Sherman Act and the Clayton Act in the United States. Monopolies are not inherently illegal, but they can engage in anti-competitive behavior that may be subject to anti-trust regulations.
    Profits Cartel members can achieve higher profits through their collusive behavior, as they can set prices higher than in a competitive market. A monopoly can achieve higher profits due to its market power, as it can set prices higher than in a competitive market.
    Consumer Impact Cartels harm consumers by limiting output and setting prices higher than in a competitive market. Monopolies can harm consumers by setting higher prices and potentially limiting output due to the lack of competition.

    In summary, a cartel is a group of independent firms that collude to manipulate prices and output, while a monopoly is a single firm that dominates a particular market. Both cartels and monopolies can have negative impacts on consumers by limiting output and setting higher prices than in a competitive market.

    Read more:

    Guilherme Mazui

    Guilherme Mazui is graduated in journalism from the Federal University of Minas Gerais (UFMG) and a master's degree in Communication from the University of São Paulo (USP). In addition, he has experience in advertising writing and has worked as a content editor in several companies.