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Entry and Predation: British Shipping Cartels 1879–1929

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  • Fiona Scott Morton

Abstract

I examine the outcomes of cases of entry by merchant shipping lines into established markets around the turn of the century. These established markets are completely dominated by an incumbent cartel composed of several member shipping lines. The cartel makes the decision whether or not to begin a price war against the entrant; some entrants are formally admitted to the cartel without any conflict. I use characteristics of the entrant to predict whether or not the entrant will encounter a price war conditional on entering. I find that weaker entrants are fought, where “weaker” means having fewer financial resources, less experience, smaller size, or poor trade conditions. The empirical results provide most support for the long‐purse theory of predation. Due to the small number of observations available, 47, I discuss qualitative evidence (such as predatory intent expressed in correspondence between cartel members) that supports the empirical results. The results are also found to be robust to misclassification of the dependent variable, which is a particular concern when dealing with historical data.

Suggested Citation

  • Fiona Scott Morton, 1997. "Entry and Predation: British Shipping Cartels 1879–1929," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 679-724, December.
  • Handle: RePEc:bla:jemstr:v:6:y:1997:i:4:p:679-724
    DOI: 10.1111/j.1430-9134.1997.00679.x
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    Cited by:

    1. Takuma Matsuda & Suguru Otani, 2022. "Unified Container Shipping Industry Data From 1966: Freight Rate, Shipping Quantity, Newbuilding, Secondhand, and Scrap Price," Papers 2211.16292, arXiv.org, revised Apr 2023.
    2. Qiang Qiu & Jinyue Yu, 2023. "Impact of independent director network on corporate green innovation: Evidence from Chinese listed companies," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 3271-3293, November.
    3. Luigi Pascali, 2017. "The Wind of Change: Maritime Technology, Trade, and Economic Development," American Economic Review, American Economic Association, vol. 107(9), pages 2821-2854, September.
    4. Stephen Martin, 2015. "Areeda–Turner and the Treatment of Exclusionary Pricing under U.S. Antitrust and EU Competition Policy," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(3), pages 229-252, May.
    5. Argenton, Cedric & Willems, Bert, 2015. "Exclusion through speculation," Other publications TiSEM 1b61bc7a-ce15-4b4c-84e6-b, Tilburg University, School of Economics and Management.
    6. Argenton, Cédric & Willems, Bert, 2015. "Exclusion through speculation," International Journal of Industrial Organization, Elsevier, vol. 39(C), pages 1-9.
    7. Bernard, Darren, 2016. "Is the risk of product market predation a cost of disclosure?," Journal of Accounting and Economics, Elsevier, vol. 62(2), pages 305-325.
    8. John M. Connor, 2003. "Private International Cartels: Effectiveness, Welfare, and Anticartel Enforcement," Working Papers 03-12, Purdue University, College of Agriculture, Department of Agricultural Economics.
    9. Argenton, Cédric, 2019. "Colluding on excluding," European Economic Review, Elsevier, vol. 113(C), pages 194-206.
    10. repec:hal:spmain:info:hdl:2441/7o52iohb7k6srk09mit038srm is not listed on IDEAS
    11. Giocoli, Nicola, 2012. "British economists on competition policy (1890-1920)," MPRA Paper 39245, University Library of Munich, Germany.
    12. Hüschelrath, Kai & Veith, Tobias, 2011. "The impact of cartelization on pricing dynamics: Evidence from the German cement industry," ZEW Discussion Papers 11-067, ZEW - Leibniz Centre for European Economic Research.
    13. repec:spo:wpecon:info:hdl:2441/7o52iohb7k6srk09mit038srm is not listed on IDEAS
    14. Argenton, C., 2010. "Predation Under Perfect Information," Other publications TiSEM c64644e5-2aae-4e41-9a47-a, Tilburg University, School of Economics and Management.
    15. Stephen Martin, 2018. "Behavioral antitrust," Chapters, in: Victor J. Tremblay & Elizabeth Schroeder & Carol Horton Tremblay (ed.), Handbook of Behavioral Industrial Organization, chapter 15, pages 404-454, Edward Elgar Publishing.
    16. Fabien Bertho, 2012. "The Impact of Liner Shipping Trade and Competition Regulations on The Market Structure, Maritime Transport Costs and Seaborne Trade Flows: Regulations on The Market Structure, Maritime Transport Costs," Sciences Po publications info:hdl:2441/7o52iohb7k6, Sciences Po.
    17. Robert Clark & Decio Coviello & Jean-Fran�ois Gauthier & Art Shneyerov, 2018. "Bid Rigging and Entry Deterrence in Public Procurement: Evidence from an Investigation into Collusion and Corruption in Quebec," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 34(3), pages 301-363.
    18. George Deltas & Richard Sicotte, 2017. "Cartel Organization, Price Discrimination, and Selection of Transatlantic Migrants: 1899–1911," Southern Economic Journal, John Wiley & Sons, vol. 83(3), pages 668-704, January.
    19. Fabien Bertho, 2012. "The impact of liner shipping trade and competition regulations on the market structure, maritime transport costs and seaborne trade flows [Les réglementations commerciales et concurrentielles dans ," SciencePo Working papers Main tel-03675986, HAL.
    20. Pedro L. Marín & Richard Sicotte, 2003. "Exclusive Contracts And Market Power: Evidence From Ocean Shipping," Journal of Industrial Economics, Wiley Blackwell, vol. 51(2), pages 193-214, June.
    21. repec:hal:wpspec:info:hdl:2441/7o52iohb7k6srk09mit038srm is not listed on IDEAS

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