Regulatory Reform in Transportation Services: Volume I – Understanding Why Cartels Exist and Sustain in Public Transportation Services

Why cartels exist?

This paper looks into the theory behind cartels, its behavior in public transportation system of Nepal and why they exist in spite of the Supreme Court’s decision in favor of ending the syndicate system, and attempts to draw inferences for anti-competitive policy in Nepal.

The study points out that policy attempts to dismantle cartels in Nepal mostly look into it from a simple lens of monopoly profit motive and ignore the other factors mentioned in the paper such as economies of scale, collective bargaining, fixed cost faced by firms based on regulatory and political environment to name a few.

This narrow perspective might be at the heart of the lack of success that these corrective measures have been facing. Therefore the study draws a conclusion that the sources and causes of cartel formation should be identified and acknowledged and the success of ensuing policy measures will depend to the extent of how well they address these other factors.

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