Cartel Behaviour and Futures Trading

Ronald W Anderson and Tiziano Brianza

CEPR Financial Market Papers from Centre for Economic Policy Research

Abstract: In this paper we explore how a cartel which is able to cooperate to a limited degree on a futures market may be able to implement a cooperative production plan which would be self-enforcing. The basic result of the paper is that appropriately chosen initial allocations of long positions in the futures market will induce members to implement noncooperatively any cooperative outcome a cartel might desire, but which would be unachievable otherwise because production quotas cannot be enforced directly. The optimal cartel futures policies are characterized both with and without side-payments. Possible obstacles to these policies are analysed. In particular we explicitly characterize the conditions under which the cartel futures policies will fail because they result in a corner of the futures market.

Keywords: Cartels; Commodity Agreements; Futures Markets (search for similar items in EconPapers)
Date: 1991-06
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprfm:0014

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