Hub-and-Spoke Cartels: Theory and Evidence from the Grocery Industry

Robert Clark, Ig Horstmann and Jean-François Houde

American Economic Review, 2024, vol. 114, issue 3, 783-814

Abstract: Numerous recently uncovered cartels operated along the supply chain, with firms at one end facilitating collusion at the other—hub-and-spoke arrangements. These cartels are hard to rationalize because they induce double marginalization and higher costs. We examine Canada's alleged bread cartel and provide the first comprehensive analysis of hub-and-spoke collusion. Using court documents and pricing data, we make three contributions: (i) we show that collusion was effective, increasing inflation by about 50 percent; (ii) we provide evidence that collusion existed at both ends of the supply chain; and (iii) we develop a model explaining why this form of collusion arose.

JEL-codes: E31 K21 L12 L14 L22 L42 L81 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/aer.20211337

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