TY - JOUR
T1 - The discontent cartel member and cartel collapse: The case of the German cement cartel
AU - Harrington, Joseph E.
AU - Hüschelrath, Kai
AU - Laitenberger, U.
AU - Smuda, Florian
PY - 2015
Y1 - 2015
N2 - We hypothesize a particular source of cartel instability and explore its relevance to understanding cartel dynamics. The cartel instability is rooted in the observation that, upon cartel formation, the relative positions of firms are often fixed which may lead some growth-conscious members to be discontent. This incongruity between a cartel member's allocated market share and its desired market share may result in systematic deviations and the eventual collapse of the cartel. This hypothesis is then taken to the German cement cartel of 1991–2002. We argue that Readymix was such a discontent cartel member and, using a rich pricing data set, are able to characterize how Readymix deviated, how other firms responded, and how it led to the collapse of the cartel.
AB - We hypothesize a particular source of cartel instability and explore its relevance to understanding cartel dynamics. The cartel instability is rooted in the observation that, upon cartel formation, the relative positions of firms are often fixed which may lead some growth-conscious members to be discontent. This incongruity between a cartel member's allocated market share and its desired market share may result in systematic deviations and the eventual collapse of the cartel. This hypothesis is then taken to the German cement cartel of 1991–2002. We argue that Readymix was such a discontent cartel member and, using a rich pricing data set, are able to characterize how Readymix deviated, how other firms responded, and how it led to the collapse of the cartel.
U2 - 10.1016/j.ijindorg.2015.07.005
DO - 10.1016/j.ijindorg.2015.07.005
M3 - Article
SN - 0167-7187
VL - 42
SP - 106
EP - 119
JO - International Journal of Industrial Organization
JF - International Journal of Industrial Organization
ER -