Market Structure and Supply Shocks: Evidence from Mining Disasters

Hinnerk Gnutzmann, Oskar Kowalewksi and Piotr Śpiewanowski
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Hinnerk Gnutzmann: Leibniz University Hannover
Oskar Kowalewksi: IESEG School of Management (LEM-CNRS-UMR 9221)
Authors registered in the RePEc Author Service: Oskar Kowalewski ()

No 2018-ACF-01, Working Papers from IESEG School of Management

Abstract: This paper provides new evidence on how imperfectly competitive markets with excess capacity mitigate the adverse impact of supply shocks on prices. We study the potash market, which is controlled by a syndicate that assigns output quotas in proportion to production capacity of its members. This sharing rule creates incentives for excess capacity investment. Hence, it insulates the market from the impact of extreme events. Using a novel data set of potash mine disasters, we show that permanent or long-term loss of up to 4% of global or 20% of country production capacity does not affect the production levels and the commodity prices.

Keywords: commodity prices; supply shocks; market structure; resilience; syndicates (search for similar items in EconPapers)
JEL-codes: L13 L72 Q31 Q54 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2018-01
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https://www.ieseg.fr/wp-content/uploads/2012/03/2018-ACF-01_Kowalewski.pdf (application/pdf)

Related works:
Journal Article: Market Structure and Resilience: Evidence from Potash Mine Disasters (2020)
Working Paper: Market structure and resilience: Evidence from potash mine disasters (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ies:wpaper:f201801

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