kartelrandeffect

Kartelrandeffect is a term that describes a phenomenon observed in cartels, particularly those involving price fixing or market allocation. It refers to the tendency for cartel members to be tempted by the possibility of increasing their individual profits by deviating from the agreed-upon cartel rules. This deviation often involves slightly undercutting the agreed-upon price or increasing production beyond the allocated quota, with the expectation that the individual gain will outweigh the potential for retaliation or the overall collapse of the cartel.

The core of the kartelrandeffect lies in the inherent tension between the collective benefit of cartel stability and the individual incentive to maximize short-term gains. While a cartel aims to maintain higher prices and profits for all its members, each member recognizes that if they can secretly sell more or at a slightly lower price, they can capture a larger share of the market and boost their own revenue. This individual temptation is a constant threat to cartel cohesion.

The success of a cartel in mitigating the kartelrandeffect depends on several factors. These include the effectiveness of monitoring mechanisms to detect deviations, the severity and credibility of penalties for rule-breaking, and the overall structure and number of cartel members. In highly competitive markets with many players, the kartelrandeffect is often more pronounced as it becomes harder to monitor all participants and the potential for a single member to be discovered is reduced. Ultimately, the kartelrandeffect highlights the fragility of collusive agreements and the powerful forces that can drive members to break ranks.