Multi-market contact and competition: evidence from the Depression-era portland cement industry
AbstractTheoretical work has suggested that contact between firms in different markets can facilitate tacit collusion. Empirical work on this link has been limited. We address the paucity of empirical evidence with a novel plant-level dataset for the cement industry during the Great Depression. We find that multi-market contact fosters tacit collusion and higher prices based on a new measure of contact that accounts for capacity utilization. A one standard deviation increase in our measure of contact increases prices by around 4.3%. We then examine the effect of the National Industrial Recovery Act's “Codes of Fair Conduct,” introduced in 1933 to stem deflation through cooperative behavior within industries. We find that the effects of the codes were most strongly felt in markets with the highest level of multi-market contact. This suggests that multi-market contact can be a useful ‘tool’ for firms to support collusive outcomes, tacit or otherwise.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 31 (2013)
Issue (Month): 5 ()
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Web page: http://www.elsevier.com/locate/inca/505551
Multi-market contact; Tacit collusion; Portland cement; National Recovery Administration; Great Depression;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
- N62 - Economic History - - Manufacturing and Construction - - - U.S.; Canada: 1913-
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
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