Cartel vs. Monopoly — What's the Difference?
By Tayyaba Rehman — Updated on September 27, 2023
A cartel is an association of similar companies or businesses who agree to control prices, production, and market shares, to reduce competition. A monopoly, however, is a market condition where a company exclusively controls the entire market.
Difference Between Cartel and Monopoly
Table of Contents
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Key Differences
Cartel and Monopoly are both economic terms denoting different forms of market structures and practices. A cartel is essentially a group of producers or sellers in the same industry who come together to control prices and limit competition by agreeing on production outputs, pricing, and allocation of markets. On the contrary, a monopoly exists when a single entity, whether a company or an individual, dominates the entire market for a specific product or service, having the power to influence prices and availability.
The function and formation of a cartel are inherently collective, implying collaboration between multiple independent entities to achieve mutual benefits by manipulating market conditions. The very essence of a monopoly, however, is singular dominance, where one entity’s exclusive control over supply allows it to manipulate prices and market conditions, often to the detriment of consumer interests and market competition.
Cartels usually operate in markets where the product is relatively homogenous and where it is possible to agree on prices or output levels, such as the oil industry. In contrast, a monopoly can exist in any industry but is most likely to occur in markets with high entry barriers, whether due to high initial investment requirements, government regulation, or control over a scarce resource.
In the realm of legal frameworks and economic ethics, cartels are generally considered illegal due to their anti-competitive practices and detrimental effects on consumer welfare and market efficiency. Monopolies, while not inherently illegal, are usually regulated to prevent abuse of market power and to protect consumer interests and market competitiveness.
The existence of cartels and monopolies fundamentally alters market dynamics. Cartels, through collective agreement, distort market competition and often lead to higher prices and restricted outputs. A monopoly, through singular dominance, can lead to lack of choice, higher prices, and sometimes, product quality degradation due to the absence of competitive pressure.
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Comparison Chart
Nature
Collective agreement among various firms.
Singular dominance by one firm.
Market Control
Control over price and output by several companies.
Exclusive control over the market by one entity.
Legality
Generally illegal due to anti-competitive practices.
Regulated but not inherently illegal.
Market Condition
Exist in homogenous product markets.
Can exist in any market with high entry barriers.
Effect on Consumer
Leads to higher prices and limited choice.
Leads to higher prices and lack of alternatives.
Compare with Definitions
Cartel
An association of manufacturers or suppliers formed to maintain prices at a high level and restrict competition.
The oil cartel agreed to reduce production to raise global oil prices.
Monopoly
Exclusive control by one company over an industry or service, suppressing competition.
The company had a monopoly on the software market, controlling prices and availability.
Cartel
A coalition or cooperative arrangement between political parties intended to promote a mutual interest.
Several small parties formed a cartel to counter the dominant party in the election.
Monopoly
The exclusive possession or control of the supply or trade in a commodity or service.
The game company had a monopoly on that genre of video games.
Cartel
An illicit alliance or agreement among a group of parties to advance mutual interest and gain.
The drug cartel controlled the illicit drug trade across the border.
Monopoly
A situation characterized by a lack of competition, leading to high prices and inferior products.
The absence of competitors allowed the firm to establish a monopoly, leading to consumer dissatisfaction.
Cartel
A formal organization of producers that agree to coordinate prices and production.
The diamond cartel manipulated diamond prices globally.
Monopoly
A market condition where there is only one producer or seller for a product.
The utility company had a monopoly on electricity supply in the region.
Cartel
A combination of independent commercial enterprises designed to limit competition.
A cartel in the steel industry led to increased steel prices.
Monopoly
The exclusive control over the trade or production of a commodity or service.
Patents grant a temporary monopoly to inventors, allowing them to profit from their inventions.
Cartel
A cartel is a group of independent market participants who collude with each other in order to improve their profits and dominate the market. Cartels are usually associations in the same sphere of business, and thus an alliance of rivals.
Monopoly
A monopoly (from Greek μόνος, mónos, 'single, alone' and πωλεῖν, pōleîn, 'to sell') exists when a specific person or enterprise is the only supplier of a particular commodity. This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly and duopoly which consists of a few sellers dominating a market.
Cartel
A combination of independent business organizations formed to regulate production, pricing, and marketing of goods by the members.
Monopoly
Exclusive control by one group of the means of producing or selling a commodity or service
"Monopoly frequently ... arises from government support or from collusive agreements among individuals" (Milton Friedman).
Cartel
An official agreement between governments at war, especially one concerning the exchange of prisoners.
Monopoly
A company, group, or individual having exclusive control over a commercial activity.
Cartel
A group of parties, factions, or nations united in a common cause; a bloc.
Monopoly
A commodity or service so controlled.
Cartel
(economics) A group of businesses or nations that collude to limit competition within an industry or market.
Drug cartel
Car cartel
Monopoly
Exclusive possession or control
Arrogantly claims to have a monopoly on the truth.
Cartel
A combination of political groups (notably parties) for common action.
Monopoly
Something that is exclusively possessed or controlled
Showed that scientific achievement is not a male monopoly.
Cartel
(historical) A written letter of defiance or challenge.
Monopoly
A situation, by legal privilege or other agreement, in which solely one party (company, cartel etc.) exclusively provides a particular product or service, dominating that market and generally exerting powerful control over it.
Cartel
An official agreement concerning the exchange of prisoners.
Monopoly
An exclusive control over the trade or production of a commodity or service through exclusive possession.
A land monopoly renders its holder(s) nearly almighty in an agricultural society.
Cartel
A ship used to negotiate with an enemy in time of war, and to exchange prisoners.
Monopoly
The privilege granting the exclusive right to exert such control.
Granting monopolies in concession constitutes a market-conform alternative to taxation for the state, while the crown sometimes bestowed a monopoly as an outrageous gift.
Cartel
An agreement between belligerents for the exchange of prisoners.
Monopoly
(metonymy) The market thus controlled.
Cartel
A letter of defiance or challenge; a challenge to single combat.
He is cowed at the very idea of a cartel.,
Monopoly
(metonymy) The holder (person, company or other) of such market domination in one of the above manners.
Cartel
To defy or challenge.
You shall cartel him.
Monopoly
The exclusive power, or privilege of selling a commodity; the exclusive power, right, or privilege of dealing in some article, or of trading in some market; sole command of the traffic in anything, however obtained; as, the proprietor of a patented article is given a monopoly of its sale for a limited time; chartered trading companies have sometimes had a monopoly of trade with remote regions; a combination of traders may get a monopoly of a particular product.
Raleigh held a monopoly of cards, Essex a monopoly of sweet wines.
Cartel
A consortium of independent organizations formed to limit competition by controlling the production and distribution of a product or service;
They set up the trust in the hope of gaining a monopoly
Monopoly
Exclusive possession; as, a monopoly of land.
If I had a monopoly out, they would have part on 't.
Monopoly
The commodity or other material thing to which the monopoly relates; as, tobacco is a monopoly in France.
Monopoly
(economics) a market in which there are many buyers but only one seller;
A monopoly on silver
When you have a monopoly you can ask any price you like
Monopoly
Exclusive control or possession of something;
They have no monopoly on intelligence
Monopoly
A board game in which players try to gain a monopoly on real estate as pieces advance around the board according to the throw of a die
Common Curiosities
Can monopolies lead to economic inefficiency?
Yes, monopolies can lead to inefficiency due to lack of competition, leading to high prices, lower outputs, and potential decline in product quality.
Is every cartel formed to increase prices?
While most cartels aim to manipulate prices to increase profits, they might also form to control outputs, allocate markets, or manipulate other market conditions.
Is every cartel illegal?
While cartels are typically illegal due to their anti-competitive nature, the legality can vary depending on jurisdictions and specific conditions.
Can a monopoly exist without breaking any laws?
Yes, monopolies can legally exist, especially when they arise due to innovation, but they are often regulated to prevent abuse of power.
Is it possible to break a cartel?
Yes, legal interventions, market forces, or disagreements among cartel members can lead to the dissolution of a cartel.
Can a monopoly occur naturally in a market?
Yes, natural monopolies can occur, especially in industries where high initial costs create barriers to entry, like utilities.
Are all members of a cartel equally powerful?
Not necessarily, some members might have more influence due to their market share, resources, or strategic positioning.
Can cartels have a global impact?
Yes, especially when they control significant global commodities like oil, cartels can have widespread economic implications.
How does a cartel manipulate market conditions?
Cartels manipulate markets by collectively agreeing on prices, production levels, and market allocations to restrict competition and increase profits.
Can a company be part of a cartel and be a monopoly?
Theoretically, yes. A company can be part of a cartel in one market while holding a monopoly in another.
Is it difficult to prove the existence of a cartel?
It can be, as cartels operate secretly, and proving collusion requires substantial evidence of coordinated actions.
How can consumers be affected by a monopoly?
Consumers can face higher prices, limited choices, and lower quality products due to the lack of competitive pressure on the monopolizing entity.
What happens when a monopoly is broken?
Breaking a monopoly can lead to increased competition, potentially resulting in lower prices, improved services, and more choices for consumers.
Can monopolies innovate?
While monopolies might lack competitive pressure to innovate, they can still innovate, especially to maintain their market dominance.
Can the presence of a monopoly discourage new market entrants?
Yes, monopolies can deter new entrants due to high entry barriers, control over resources, or the ability to dictate prices.
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Written by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
