When Are Cartels Stable Contracts?

Andrew R Dick

Journal of Law and Economics, 1996, vol. 39, issue 1, 241-83

Abstract: Why do some industry cartels survive for decades while others are quickly undermined by price wars and entry? Variation in cartels' longevity can be explained by differences in their costs of self-enforcement and service value to members. Analyzing legal cartel contracts formed under the Webb-Pomerene Export Trade Act, I find that longer-lived cartels tended to export to small buyers, to have wide industry coverage, to operate in periods of stable prices and growing demand and to sell under side agreements with foreign competitors. Contracts in which the cartel centralized its control through a common sales agency tended to be more stable. However, cartels usually grew less stable with age and when there was a recent and long history of cartelization in the industry. Finally, cartels whose primary rationale was to fix price tended to be particularly unstable because these contracts invited fringe competition and entry. Copyright 1996 by the University of Chicago.

Date: 1996
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (57)

Downloads: (external link)
http://dx.doi.org/10.1086/467349 (application/pdf)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlawec:v:39:y:1996:i:1:p:241-83

Access Statistics for this article

More articles in Journal of Law and Economics from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().