Final answer:
A cartel is a coordinating group of competing firms that form agreements to collude, usually to control prices or output, mimicking a monopoly. This practice, however, is illegal in the U.S. due to antitrust laws and not always successful due to incentives for individual firms to cheat on the agreement.
Step-by-step explanation:
A cartel is typically understood as a coordinating group of competing firms that agree to collude, which is considered anti-competitive behavior and is therefore illegal in many countries, including the United States. Cartels form agreements to collaborate on certain business practices, such as setting prices or limiting production, aiming to mimic the effect of a monopolist by reducing output and increasing prices. However, such explicit collusion is hard to maintain due to individual incentives to cheat on the agreement and the legal consequences if caught.
Enforcement agencies in the U.S., like the Antitrust Division of the Justice Department and the Federal Trade Commission, actively work to prevent such collusive behaviors. Consequently, explicit collusion through cartels is rare in the United States, with most collusion being tacit, where firms unofficially and implicitly agree that competition is undesirable for their profits.
Lastly, while cartels may intend to raise profits by acting together, they are not always successful in doing so, especially when individual members have an incentive to cheat for short-term gains, which can lead to the breakdown of the cartel agreement.