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Commodity Market Dynamics and the Joint Executive Committee, 1880–1886

Author

Listed:
  • Franco Mariuzzo

    (University of East Anglia)

  • Patrick Paul Walsh

    (University College Dublin)

Abstract

Using weekly spot and future commodity prices in Chicago and New York, we construct expected transportation rates for grain between these two cities, expected inventory levels in New York, and realized errors in the expectations of such variables. We incorporate these exogenous commodity market dynamics into Porter's (1983) structural modeling of the Joint Executive Committee Railroad Cartel. As in Porter, we model marginal cost as a parametric function of (instrumented) output, among other factors. Unlike Porter, we model pricing over marginal cost as a nonparametric function of a set of variables, which include expectations of deterministic demand cycles and cartel stability. We estimate the pricing and demand equation simultaneously and semiparametrically. Our estimated weekly markups during periods of cartel stability are shown to reflect optimal collusive pricing over deterministic business cycles, as modeled in Haltiwanger and Harrington (1991). Periods of cartel instability are proven to be triggered by realized mistakes in expectations of New York grain prices. © 2012 by The President and Fellows of Harvard College and the Massachusetts Institute of Technology Published under a Creative Commons Attribution = NonCommercial 3.0 Unported (CC BY = NC 3.0) License

Suggested Citation

  • Franco Mariuzzo & Patrick Paul Walsh, 2013. "Commodity Market Dynamics and the Joint Executive Committee, 1880–1886," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1722-1739, December.
    • Handle: RePEc:tpr:restat:v:95:y:2013:i:5:p:1722-1739
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    Cited by:

    1. Jaworski, Taylor, 2020. "Specification and structure in economic history," Explorations in Economic History, Elsevier, vol. 77(C).
    2. Danial Asmat, 2021. "Collusion Along the Learning Curve: Theory and Evidence From the Semiconductor Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 69(1), pages 83-108, March.
    3. Dan Bernhardt & Mahdi Rastad, 2016. "Collusion Under Risk Aversion and Fixed Costs," Journal of Industrial Economics, Wiley Blackwell, vol. 64(4), pages 808-834, December.

    More about this item

    Keywords

    commodity markets; demand shocks in New York; deterministic demand cycles between Chicago and New York; elevators inventory management; JEC railroad cartel; semi-parametric estimator; structural modeling;
    All these keywords.

    JEL classification:

    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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