‘Cartel’s are a kind of ‘collusive’ oligopoly. OPEC’ Organisation of Petroleum Export countries is one of the example of collusive oligopoly, In this type uf oligopoly, a group is formed under ali agreement, where they decide regarding price of the product output and area of distribution and marketing. Collusive oligopoly is a kind of market in which the whole market is controlled and divided by the group, and the changed the output as well as price whenever they decide.
In the present world of globalisation and liberalisation many companies are either merging with other big concerns or forms a ‘pool’ or it is completely ‘taken-over’ by the big firms. Cartels are taking new shapes. Some companies they come together and form a group-d and decide the pricing and output policy which is explained below. ‘AR’ is the total demand for the product in the market (including both national and international market)’MR’ is the marginal revenue and ‘MC’ i, the marginal cost. Equilibrium is achieved at point ‘EE Which determines the output ‘OQ’. If we raise the line ‘Qr;’ it will cut at. point ‘K’ on average revenue AR
curve. Draw ‘I’K’ horizontal curve, l lcncc ’01” is the price and the total quantity produced in an economy or group is ‘OQ’. From point ‘E’ when we draw a horizontal curve to ‘x’ axis it cuts Me., MC~ & MCt at point ‘LI’ ‘L~’ AND L1· MC.,. MC~ and MCt are marginal n>~t of firm’s ‘u’. ‘b’ ami ‘c. Draw perpendicular'< ‘-IQI L2Q2 & L\Q\ which is nothing but the three films ‘a’, ‘b’ ami ‘c’ are producing ‘OQ,’, ‘OQ2′ and ‘OQ\’ output. The total output OQ OQ, firm ‘a'” output OQ2 film ‘b” output oo.n-» ‘c” output ., OQ” + OQ2~+ OQIc = O() . In thi. way the orgul olists form a group called
collusive – oligor ly and determines the price ‘OP’ and they share their output in the total market demand.