Cartels Are an Emergent Phenomenon, Say Complexity Theorists - Technology Review

Cartels Are an Emergent Phenomenon, Say Complexity Theorists - Technology Review
Money quotes --

But it also goes further. Peixoto and Bornholdt say that when condition are right, cartel-like behaviour emerges naturally without collusion between sellers.

The results make interesting reading. It turns out that a crucial factor is the speed at which buyers and sellers react to the market. When buyers react quickest, sellers are forced to match the best possible value for money and prices tend to drop. 

By contrast, when sellers react quickest, they are quick to copy others offering poor value for money. This reduces the number of sellers offering good value for money in a vicious cycle that drives prices as high as possible.

This is the emergence of a cartel and it happens in these guys' model without any collusion between sellers. Instead, it is an emergent property of the market place that happens when the sellers outperform buyers in the way they react to market conditions.

"This cartel organization is not due to an explicit collusion among agents; instead it arises spontaneously from the maximization of the individual payoffs," say Peixoto and Bornholdt.

The big question of course is what to do. Cartels that form by collusion are illegal and clearly not in the interests of the general population.