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Rent sharing to control noncartel supply in the German cement market

Author

Listed:
  • Joseph Harrington
  • Kai Hüschelrath

    (Centre for European Economic Research (Mannheim, Germany) - Zentrum für Europäische Wirtschaftsforschung (ZEW) - Universität Mannheim)

  • Ulrich Laitenberger

    (Centre for European Economic Research (Mannheim, Germany) - Zentrum für Europäische Wirtschaftsforschung (ZEW) - Universität Mannheim, SES - Département Sciences Economiques et Sociales - Télécom ParisTech, ECOGE - Economie Gestion - I3 SES - Institut interdisciplinaire de l’innovation de Telecom Paris - Télécom ParisTech - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique)

Abstract

A challenge for many cartels is avoiding a destabilizing increase in noncartel supply in response to having raised price. In the case of the German cement cartel that operated over 1991–2002, the primary source of noncartel supply was imports from Eastern European cement manufacturers. Testimonies in a private enforcement case have claimed that the cartel sought to control imports by sharing rents with intermediaries in order to discourage them from sourcing foreign supply. Specifically, cartel members would allow an intermediary to issue the invoice for a transaction and charge a fee even though the output went directly from the cartel member's plant to the customer. We investigate this claim by first developing a theory of collusive pricing that takes account of the option of bribing intermediaries. The theory predicts that the cement cartel members are more likely to share rents with an intermediary when the nearest Eastern European plant is closer and there is more Eastern European capacity outside of the control of the cartel. Estimating a logit model that predicts when a cartel member sells through an intermediary, the empirical analysis supports both predictions.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Joseph Harrington & Kai Hüschelrath & Ulrich Laitenberger, 2018. "Rent sharing to control noncartel supply in the German cement market," Post-Print hal-02082091, HAL.
  • Handle: RePEc:hal:journl:hal-02082091
    DOI: 10.1111/jems.12234
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    References listed on IDEAS

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    Cited by:

    1. Suguru Otani, 2024. "Industry Dynamics with Cartels: The Case of the Container Shipping Industry," Papers 2407.15147, arXiv.org.
    2. Suguru Otani, 2024. "Industry Dynamics with Cartels: The Case of the Container Shipping Industry," Discussion Paper Series DP2024-28, Research Institute for Economics & Business Administration, Kobe University.
    3. Matthias Hunold & Kai Hüschelrath & Ulrich Laitenberger & Johannes Muthers, 2020. "Competition, Collusion, and Spatial Sales Patterns: Theory and Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 68(4), pages 737-779, December.
    4. Leonardo Madio & Aldo Pignataro, 2022. "Collusion sustainability with a capacity constrained firm," "Marco Fanno" Working Papers 0295, Dipartimento di Scienze Economiche "Marco Fanno".
    5. Leonardo Madio & Aldo Pignataro, 2022. "Collusion Sustainability with a Capacity Constrained Firm," CESifo Working Paper Series 10170, CESifo.
    6. Bovin, Andreas & Bos, Iwan, 2023. "Market Shares as Collusive Marker: Evidence from the European Truck Industry," Research Memorandum 011, Maastricht University, Graduate School of Business and Economics (GSBE).

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    More about this item

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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