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On the Workings of a Cartel: Evidence from the Norwegian Cement Industry

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Author Info
Lars-Hendrik Roller
Frode Steen

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Abstract

Using data on prices, production, and exports, we are able to identify marginal costs as well as the effectiveness of the Norwegian cement industry cartel. We find that our marginal cost estimates are very much in line with the detailed cost accounting data. We show that the cement cartel has been ineffective because the sharing rule induces "overproduction" and exporting below marginal costs. It is consumers -- not firms -- who benefit from the sharing rule. The ineffectiveness of the cartel was becoming so large that domestic welfare of a merger to monopoly would be positive around 1968, which is when the merger actually took place! We also show that competition would have resulted in even higher welfare gains over the entire sample.

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File URL: http://hdl.handle.net/10.1257/000282806776157713
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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 96 (2006)
Issue (Month): 1 (March)
Pages: 321-338
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Handle: RePEc:aea:aecrev:v:96:y:2006:i:1:p:321-338

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Mukesh Eswaran, 1997. "Cartel Unity over the Business Cycle," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 644-72, August. [Downloadable!] (restricted)
  2. James A. Brander & Richard Harris, 1983. "Anticipated Collusion and Excess Capacity," Working Papers 530, Queen's University, Department of Economics.
  3. Davidson, Carl & Deneckere, Raymond J, 1990. "Excess Capacity and Collusion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 521-41, August. [Downloadable!] (restricted)
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  4. Benoit, Jean-Pierre & Krishna, Vijay, 1987. "Dynamic Duopoly: Prices and Quantities," Review of Economic Studies, Blackwell Publishing, vol. 54(1), pages 23-35, January. [Downloadable!] (restricted)
  5. Mats Bergman, 1997. "Antitrust, Marketing Cooperatives, and Market Power," European Journal of Law and Economics, Springer, vol. 4(1), pages 73-92, January. [Downloadable!] (restricted)
  6. Aiginger, Karl & Pfaffermayr, Michael, 1997. "Looking at the Cost Side of "Monopoly."," Journal of Industrial Economics, Blackwell Publishing, vol. 45(3), pages 245-67, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Iwan Bos & Joseph E. Harrington, Jr., 2008. "Endogenous Cartel Formation with Heterogeneous Firms," Economics Working Paper Archive 544, The Johns Hopkins University,Department of Economics, revised Nov 2008. [Downloadable!]
  2. Rodrigo M. Zeidan & Marcelo Resende, 2005. "Measuring Market Conduct in the Brazilian Cement Industry: a Dynamic Econometric Investigation," Economics Working Papers ECO2005/13, European University Institute. [Downloadable!]
    Other versions:
  3. Lukasz Grzybowski & Pedro Pereira, 2007. "Merger Simulation in Mobile Telephony in Portugal," Review of Industrial Organization, Springer, vol. 31(3), pages 205-220, November. [Downloadable!] (restricted)
    Other versions:
  4. Cameron Hepburn & John K.-H. Quah & Robert A. Ritz, 2008. "Emissions Trading with Profit-Neutral Permit Allocations," Economics Papers 2008-W12, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
  5. Cameron Hepburn & John K.-H. Quah & Robert A. Ritz, 2006. "Emissions Trading and Profit-Neutral Grandfathering," Economics Series Working Papers 295, University of Oxford, Department of Economics. [Downloadable!]
  6. Roland Ismer & Karsten Neuhoff, 2007. "Border tax adjustment: a feasible way to support stringent emission trading," European Journal of Law and Economics, Springer, vol. 24(2), pages 137-164, October. [Downloadable!] (restricted)
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