How Cartels Really Work, Episode 1: What Makes Something a Cartel?

Two gas stations competing with each other charge $4.50 each. That alone does not tell us whether they formed a cartel. They may incur the same costs. They may react to each other’s prices independently. Repeated interaction may teach them not to start price wars. Economists might refer to the result as tacit collusion. Or they may have conspired to set prices. In the first episode of How Cartels Really Work, EconWorks explores the boundary between competition and cartel behavior—and why the economic outcome alone can’t tell us where firms fall on that boundary. And then we replace the human pricing managers with AIS. Suppose both companies instruct their systems to maximize profits, obey antitrust laws, and never collude. What if the AI agents do talk to each other, coordinate, find a workaround, or hide what they are doing anyway? The technology is new, but the question behind it is an old one: When have competitors stopped acting on their own and started acting together?Read the full article and graphic analysis: https://blog.econworks.com/p/how-cartels-really-work-episode-1?r=562wriExplore more visual economics content: https://econworks.comYouTube: https://www.youtube.com/@EconWorks-d3eSubstack: https://blog.econworks.com This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit blog.econworks.com/subscribe