Voting in Cartels: Theory and Evidence from the Shipping Industry
AbstractWe examine the choice of voting rules by legal cartels with enforcement capabilities in the presence of uncertainty about demand and costs. We show that cartels face a trade-off between the commitment advantages of more stringent majority requirements and the loss of flexibility resulting from them. Expected heterogeneity in costs or demand conditions leads away from simple majority toward more stringent rules, while larger membership to the cartel leads away from unanimity toward less restrictive rules. Evidence from the shipping conferences of the late 1950s largely supports our model. With few firms, the rule favored by heterogeneous conferences is unanimity. In larger cartels, the favored rule is either 2/3 or 3/4-majority rule.
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Bibliographic InfoPaper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number 0404.
Length: 19 pages
Date of creation: Feb 2004
Date of revision: 05 Mar 2004
Other versions of this item:
- César Martinelli & Rich Sicotte, 2004. "Voting in Cartels: Theory and Evidence from the Shipping Industry," Levine's Bibliography 122247000000000598, UCLA Department of Economics.
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