1. Cartels
Inside the world of OPEC & DeBeers
Price S D
Quantity

2. Self-Regulation? Self-Regulates Easy entry/exit
Risk of Price Fixing/Collusion
Perfect
Competition
Monopolistic
Competition
Monopoly
Oligopoly
# Competitors: Unlimited Many to One
Most competitive
Least competitive

3. Cartels Cartels How they affect price
A group of firms acting in unison to impact the price of their product
called collusion
Illegal in USA based on Anti-Trust Laws
How they affect price
Cartels typically do not set the price of their good
They collude to limit the supply of their product
In this way, they keep price artificially high S2

4. OPEC Supplies 45% of oil supply Can influence price by limiting supply
Organization of the Petroleum Exporting Countries (OPEC)
Effect on Oil Market
Controls 2/3rds of oil reserves
Supplies 45% of oil supply
Can influence price by limiting supply
use quotas for each country
Does not “set” oil prices
OPEC Meeting

5. Oil Prices per Barrel
Current
Price:
$105

6. OPEC & the Price of Oil
Oil
Price S D
Quantity

7. Gemstones:
What should determine their value?

8. Diamond Market Summary
Diamonds were very rare until 1871
Kings/Royalty bought them
DeBeers controls 2/3rds of diamond market
DeBeers is a Cartel
Cartels are illegal in USA
They attempt to act like a monopoly
Diamonds are less rare than other gemstones

9. DeBeers Video Analysis
Demand
Supply
Price S D
Quantity

10. Graphing Supply & Demand S1 E2 Q2 S1 D1 D1 P1 Q1 P1 E1 Q1
Demand is kept artificially high & inelastic through advertising
Supply is kept artificially low by DeBeers
End Result: Higher prices paid & larger quantity sold

11. Diamonds

12. Price Fixing Price fixing is collusion among competitors to fix prices
If firms fully cooperate prices rise toward monopoly prices
Illegal by Anti-Trust Laws

13. Samsung, Toshiba, LG accused of price-fixing
2006: LCD price-fixing:
Samsung, Toshiba, LG accused of price-fixing
The complaint alleges top-level executives at those firms attended secret meetings
on a monthly or quarterly basis where they agreed upon minimum prices,
price targets, increases ….