Output restrictions

Output restrictions may also be thought of as supply restrictions. They occur when competitors agree to prevent, restrict or limit the volume or type of particular goods or services available.

Output restrictions

The intention of businesses in restricting outputs is to create scarcity in order to either increase prices or stop prices from falling. Generally, a cartel needs the support of key market participants to achieve this aim.

Any business may independently decide to reduce output to respond to market demand, but it is against the law to make an agreement with competitors to coordinate restricting an output.

Impact of output restrictions

Output restrictions reduce the available supply of particular goods or services which artificially increases demand for the product and so increases the price.

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