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Cartels, Contracts and Centralization: The Transition to Futures Trading for Primary Commodities

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  • Haskel, Jonathan

Abstract

Trading in futures markets has grown substantially for many commodities. At the same time the power of many dominant producers has weakened and core prices have tended to fall towards those on the fringe. Existing cartel/fringe models fail to explain the difference between core and fringe prices and have no role for the development of futures trading. We present a cartel/fringe model that incorporates search and contracting. The model predicts that cartel prices exceed those on the fringe; that the cartel/fringe price differential narrows as futures trading increases; and that a move to contracting lowers market prices.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1193.

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Date of creation: Jun 1995
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Handle: RePEc:cpr:ceprdp:1193

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Related research

Keywords: Cartel/Fringe Models; Contracting; Futures Makets; Search;

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Cited by:
  1. Gilbert, Christopher L., 1995. "International commodity control : retrospect and prospect," Policy Research Working Paper Series 1545, The World Bank.

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