A cartel is an organization resulting from a formal agreement between a group of producers of goods or services to regulate the supply of price regulation or manipulation. In other words, a cartel is a set of otherwise independent undertakings or countries that act together as if they were a single producer and can therefore fix the prices of the products they produce and the services they provide without competition. Between 1995 and 2000, it was found that music companies used illegal marketing agreements, such as minimum prices, to artificially inflate the prices of compact discs in order to end the price struggles of discounts such as Best Buy and Target in the early 1990s. It is estimated that customers were overwhelmed by nearly 500 million $US and up to 5 $US per album. A comparison in 2002 included music publishers and distributors; Sony Music, Warner Music, Bertelsmann Music Group, EMI Music, Universal Music, as well as retailers Musicland, Trans World Entertainment and Tower Records. As reimbursement for price settlement, they agreed to pay a fine of $US 67.4 million to distribute 75.7 million $US on CD to public and associative groups. The prisoners` dilemma is a specific type of game in game theory that shows why collaboration is difficult for oligopolists to maintain, even if it is beneficial for both parties. In the game, two members of a criminal gang are arrested and imprisoned. Prisoners are separated and have to think about their options.
If both prisoners confess, each serves a two-year prison sentence. If one confesses, but the other denies the crime, the one who confessed will leave free, while the one who denies the crime would receive a three-year prison sentence. If both deny the crime, they will serve only one year in prison. Betraying the partner through an agreement is the dominant strategy; This is the best strategy for every player, no matter how the other player plays. This is called the Nash equilibrium. The result of the game is that the two prisoners have an individual logic and betray if they had collectively achieved a better result, if they had both cooperated. Unlike price-fixing, price leadership is a kind of informal agreement that is usually legal. Price leadership, sometimes referred to as parallel pricing, occurs when the dominant competitor publishes its price in front of other companies in the market and the other companies then adjust the advertised price….