From the Firm to Economic Integration
New Thinking in Political Economy series
Chapter 3: Cartels as efficient productive structures
Cartels are considered as specific productive structures that allow producers to exert a monopoly power. But this traditional link between cartels and monopoly power is debatable. In fact, the evaluation of the working of cartels is closely linked to the theory of competition and monopolies which one adopts. Thus, Murray Rothbard has made breakthrough contributions by persuasively showing that there is no monopoly power as far as there are only voluntary arrangements. We agree with such an approach and we consider that freedom of entry in production is the only relevant criterion to evaluate productive structures, so that one might dismiss as irrelevant all the traditional conditions of the pure and perfect competition theory. In the present chapter we will not address this general debate about competition and monopolies. Our precise aim is rather to look for the specific characteristics of cartels and to evaluate them under the light of our approach of competition. Cartels are generally considered negatively as formal arrangements to restrict production. After having discussed this approach we explain why cartels rather play a positive role in meeting some specific demands of the market. As a consequence they modify the frontier between the firm and the market.
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