Cartel (a) is a term used to describe a formal agreement among companies in an oligopolistic industry. Cartel members may agree on such matters as prices, total industry output, market shares, allocation of customers, allocation of territories, bid-rigging, the establishment of common sales agencies, and division of profits or combination of these. Context: Cartel in this broad sense is synonymous with “explicit” forms of collusion. Cartels formed for the mutual benefit of member companies. The theory of “cooperative” oligopoly provides the basis for analyzing the formation and the economic effects of cartels. Generally speaking, cartels or cartel behaviour attempts to copy that of monopoly by restricting industry output, raising or fixing prices in order to earn higher profits or lower product span (light bulb lifespan limited to last 1000 hrs. and nylon stockings from DuPont was too strong that chemist working forced to remake their formula by the company).
The light bulb cartel 1925
A well-known cartel was formed already 1925 in Geneva when a few very powerful businesses men representing the largest light bulb manufacturers launched a worldwide cartel, the mission to lower the average lifespan of the light bulb to 1000 hrs. However, already then 2500 hrs. lifespan obtained. Simultaneously another company produced and applied for patent lasting 100.000 hrs. See also planned product obsolescence in the Eco-Fashion Encyclopedia.
- Glossary of Industrial Organisation Economics and Competition Law, compiled by R. S. Khemani and D. M. Shapiro, commissioned by the Directorate for Financial, Fiscal and Enterprise Affairs, OECD. Film documentary The Light Bulb Conspiracy, Pyramids of Waste.