The JEC Revisited: Did Debt Undermine Stability?

Peter Grossman () and Kathy Gjerde ()

Atlantic Economic Journal, 2009, vol. 37, issue 1, 65-71

Abstract: The Joint Executive Committee (JEC), one of the most studied cartels in all of economics, was at best partially successful at maintaining collusion. The railroad cartel faced frequent breakdowns and re-contracting efforts. This paper considers the effects that large capital debt may have had on the members of the JEC. The JEC is compared to the express cartel of the period in which all firms were creditors. The latter had no breakdowns during the same period. It is shown through a small modification in an oligopolistic supergame that debt-burdened firms are less likely to maintain a stable cartel agreement than a cartel of creditors, a result that is consistent with the experience of these two cartels. Copyright International Atlantic Economic Society 2009

Keywords: Cartels; Oligopolistic supergames; The Joint Executive Committee; The railroad express; N71; L13; L60 (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1007/s11293-008-9160-8

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