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Cartels stifle innovation far less than monopolies do. Firstly, cartel members will compete to acquire an innovation that does not break the cartel agreement*, resulting in all parties seeking to implement it. This creates a market for the innovation, and hence innovators are rewarded. Those cartel members which perform better in this market for innovation are more likely to survive than those which do not. By contrast, a monopoly is likely to survive regardless of how well they perform in the innovation market. Secondly, if the innovation can be acquired exclusively, and produces a sustainable competitive advantage, a cartel member is likely to acquire it even at the expense of breaking the cartel agreement.
____ * This is usually the case; cartel agreements generally concentrate on price fixing and market allocation.
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