What factors decide cartel stability?

• Seller concentration and number of firms – high concentration and small number of firms contributes to cartel stability • Different goals of firms – conflicting objectives of members makes cartels unstable • Process of cartel formation and assignment of quotas • Non-price competition – significant opportunities for non-price competition makes cartels unstable • Monitoring and detection of cheating – cartels are stable if there is effective mechanism of monitoring and detection of non-compliance • Sanctions – ability of the cartel to impose punishment on non-compliance behavior increases chance of cartel stability • Buyer concentration – lower buyer concentration facilitates cartel stability • Fluctuations in demand • Entry – profitability and stability of cartels depends on effective deterrence of entry by new firms • Competition law – Leniency program. There is no fine for a firm if they blow the whistle on a cartel.