Monopolistic agreement
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Agreement monopolistic is the behavior of the companies which is undertaken to reduce competition in the market. Their goal is to avoid the competitive struggle and maximize profit.
Supporting factors
Factors supporting the tendency to creating monopolistic agreements:
- High barriers of entry to the market
- Homogeneity of goods produced by companies
- Stability of the market
- A small number of companies in the industry
Types
There are two types of monopolistic agreements:
- Horizontal - concluded between companies at the same level of production or marketing. Agreements may include price collusion by competitors, market sharing according to territorial criteria, product and determining the volume of sales or production.
- Vertical - entered into by firms located at different levels of production or marketing. Such agreements involves intent on the unlawful restriction of competition.
Forms of monopolistic agreements under oligopoly
- Pull or Ring - loose agreement for the implementation of specific projects (short duration)
- Cartel - created in order to reduce competition between traders belonging to the same industry (common prices, production, markets)
- Syndicate - a higher form of the cartel agreement, where the joint venture involves a commercial office, which handles the sales price or policy
- Trust - companies associated in the same industry lose their legal status and economic independence and are subject to the joint management board
- Group of companies - an association of companies operating under common management, but with a distinct organizational and legal status
- Conglomerate - a monopoly agreement where companies act under one management in addition to the core business operating in other industries.
- Holding - a public company that holds shares of various companies
References
- Mussa, M., & Rosen, S. (1978). Monopoly and product quality. Journal of Economic theory, 18(2), 301-317.
