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A cartel is a collection of independent market participants who collude with each other to improve their collective profit by means of price fixing, sharing markets, or other restrictive practices. Members of a cartel would try to earn 'supernormal' profits in the market that is not possible otherwise.

Cheating in this context typically refers to a member of a cartel secretly pursuing their own interests, particularly through not adhering to the agreed upon pricing or production levels. This can be by producing more than the agreed quantity or selling a product at a lower price than what was collectively fixed, aiming to gain more market share or profit at the expense of other cartel members.

Cheating becomes a typical problem in a cartel for several reasons. Firstly, because the incentive to cheat in a cartel is often high - the cheating firm can increase its own revenues by selling more units or at higher prices than agreed, while still benefiting from the reduced competition resulting from the cartel's overall actions. Referring to basic economic principles, firms are motivated by self-interest and the pursuit of profit, so it tends to be in a firm's individual interest to cheat. Secondly, monitoring and enforcement within cartels can be challenging. Effective monitoring requires transparent sharing of information which can be hindered by several issues like legal issues, trust deficit among members, etc. Without effective enforcement mechanism, chances of cheating increase. Therefore, despite forming a collective agreement to behave contrarily, it is often the case that self-interest dominates over collective interest leading to the cheating problem.