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Cartel contract duration: empirical evidence from inter-war international cartels

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  • Valerie Y. Suslow
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    Abstract

    A formal cartel organization sets up a multilateral relationship between firms in a given industry. While standard contracting literature has studied bilateral monopoly relationships in detail, there are horizontal relationships, like cartels, that also have contractual aspects. To shed light on how these contracts work, this paper takes a sample of legal formal cartel contracts and examines their structure and durability. Borrowing from industrial organization theories and transaction cost theories, the empirical model tests for the importance of demand uncertainty and cartel organizational characteristics in determining cartel contract duration. The results show that the more uncertain the environment within which the cartel operates, the shorter the expected cartel duration. Other industry structure characteristics and cartel organization variables included in the empirical model have a much weaker influence on duration. Copyright 2005, Oxford University Press.

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    Bibliographic Info

    Article provided by Oxford University Press in its journal Industrial and Corporate Change.

    Volume (Year): 14 (2005)
    Issue (Month): 5 (October)
    Pages: 705-744

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    Handle: RePEc:oup:indcch:v:14:y:2005:i:5:p:705-744

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    Cited by:
    1. Kühn, Kai-Uwe, 2006. "How Market Fragmentation Can Facilitate Collusion," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5948, C.E.P.R. Discussion Papers.
    2. Hyytinen, Ari & Steen, Frode & Toivanen, Otto, 2013. "Anatomy of Cartel Contracts," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9362, C.E.P.R. Discussion Papers.
    3. Zhou, J., 2012. "Endogenous Lysine Strategy Profile and Cartel Duration: An Instrumental Variables Approach," Discussion Paper, Tilburg University, Tilburg Law and Economic Center 2012-009, Tilburg University, Tilburg Law and Economic Center.
    4. Bolotova, Yuliya V., 2009. "Cartel overcharges: An empirical analysis," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 70(1-2), pages 321-341, May.
    5. Prokop, Jacek, 2011. "Powstawanie i stabilność karteli heterogenicznych
      [The emergence and stability of heterogeneous cartels]
      ," MPRA Paper 43712, University Library of Munich, Germany.
    6. Roman Inderst & Frank Maier-Rigaud, 2013. "Umbrella Effects," Working Papers, IESEG School of Management 2013-ECO-17, IESEG School of Management.
    7. Gérard Gaudet, 2007. "Natural resource economics under the rule of Hotelling," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 40(4), pages 1033-1059, November.
    8. Benchekroun, Hassan & Gaudet, Gerard & Van Long, Ngo, 2006. "Temporary natural resource cartels," Journal of Environmental Economics and Management, Elsevier, vol. 52(3), pages 663-674, November.
    9. Zhou, Jun, 2011. "A Note on “Modeling the Birth and Death of Cartels with An Application to Evaluating Competition Policy†by Harrington and Chang (2009)," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University 362, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

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