Cesar Martinelli () (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM)) Richard Sicotte () (Economics Department, University of Vermont)
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We 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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Paper provided by Centro de Investigacion Economica, ITAM in its series Working Papers with number
0404.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cramton, Peter C & Palfrey, Thomas R, 1990.
"Cartel Enforcement with Uncertainty about Costs,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 17-47, February.
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