Cartels can dissolve for several reasons, including:
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Internal Conflicts: Members of a cartel may have differing interests or business strategies, leading to disagreements over pricing, market control, or resource allocation. This can create rifts that weaken the cartel's cohesion.
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Market Dynamics: Changes in supply and demand, entry of new competitors, or shifts in consumer preferences can undermine the cartel's ability to control the market. If prices fall or a new player disrupts the market, members might compete against each other rather than cooperate.
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Legal Pressure: Governments and regulatory bodies often have laws against cartel behavior. Increased surveillance, investigations, and prosecutions can lead to the dissolution of a cartel as members fear legal repercussions.
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Cheating: Cartel members may not adhere to agreed-upon terms, such as price fixing or production limits. If one member undercuts prices or increases production to gain market share, it can incentivize other members to do the same, ultimately leading to the cartel's collapse.
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Economic Crises: Economic downturns can strain cartel agreements. During tough financial times, members may prioritize individual survival over collective agreements, prompting a breakdown of cooperation.
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Increased Alternatives: The emergence of substitute products or alternative suppliers can reduce the cartel's market power, prompting members to compete rather than collaborate.
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Exposure and Whistleblowing: One member might turn informant or "whistleblower" to escape penalties or gain advantages, exposing the cartel's activities and leading to its disbandment.
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Changes in Leadership: Leadership changes within cartel organizations can lead to different priorities or management styles that may clash with established cartel agreements.
Due to these factors, the stability of a cartel can be quite fragile, often leading to its eventual dissolution.