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Exclusive Contracts and Market Power: Evidence from Ocean Shipping

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Author Info
Marín Uribe, Pedro Luis
Abstract

There is a substantial theoretical literature on the potential effects of loyalty contracts, but a relative paucity of empirical work. This Paper employs the event study methodology to examine the effect of exclusionary contracts on firm performance in the ocean shipping industry. Shipping conferences - legal cartels exempt from antitrust laws - offered discounts to customers that patronized exclusively cartel member firms. The usage of these contracts was the subject of an extended legal and political struggle. We test for the impact of the most important events in this conflict on the stock returns of firms in the shipping industry. We find that some of these events resulted in significant changes in the firms’ stock returns. Our evidence suggests that exclusive contracts may have contributed to market power in the shipping industry.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2828.

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Date of creation: Jun 2001
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Handle: RePEc:cpr:ceprdp:2828

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Related research
Keywords: Event Study Exclusive Contracts Shipping Conferences

Find related papers by JEL classification:
K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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  15. Innes, Robert & Sexton, Richard J, 1994. "Strategic Buyers and Exclusionary Contracts," American Economic Review, American Economic Association, vol. 84(3), pages 566-84, June. [Downloadable!] (restricted)
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  19. Fama, Eugene F & French, Kenneth R, 1996. " Multifactor Explanations of Asset Pricing Anomalies," Journal of Finance, American Finance Association, vol. 51(1), pages 55-84, March. [Downloadable!] (restricted)
  20. Sjostrom, William, 1989. "Collusion in Ocean Shipping: A Test of Monopoly and Empty Core Model s," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1160-79, October. [Downloadable!] (restricted)
  21. Ellison, Sara Fisher & Mullin, Wallace P, 1995. "Economics and Politics: The Case of Sugar Tariff Reform," Journal of Law & Economics, University of Chicago Press, vol. 38(2), pages 335-66, October.
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