IDEAS home Printed from https://ideas.repec.org/p/uwo/uwowop/20216.html
   My bibliography  Save this paper

The Inner Workings of a Hub-and-Spoke Caretl in the Automotive Fuel Industry

Author

Listed:

Abstract

We analyze a hub-and-spoke cartel in the Brazilian automotivefuel industry. Using the court documents and detailed data on the supply chain we uncover three mechanisms beyond information sharing used by wholesalers (hub) to help retailers (spokes) solve the obstacles of price coordination: vertical transfers across asymmetric spokes; subsidies during punishment; and cost stabilization. We argue that wholesalers benefited from the cartel by being the exclusive supplier during the scheme. We use the synthetic control approach to quantify how successful the cartel was in increasing markups. We find that not only retailers, but wholesalers benefited from the cartel.

Suggested Citation

  • Daniel Chaves & Marco Duarte, 2021. "The Inner Workings of a Hub-and-Spoke Caretl in the Automotive Fuel Industry," University of Western Ontario, Departmental Research Report Series 20216, University of Western Ontario, Department of Economics.
    • Handle: RePEc:uwo:uwowop:20216
    as

    Download full text from publisher

    File URL: https://ir.lib.uwo.ca/cgi/viewcontent.cgi?article=1842&context=economicsresrpt
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(3), pages 967-1015.
    2. Christopher R. Knittel & Victor Stango, 2003. "Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards," American Economic Review, American Economic Association, vol. 93(5), pages 1703-1729, December.
    3. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    4. Robert Clark & Jean-François Houde, 2014. "The Effect of Explicit Communication on pricing: Evidence from the Collapse of a Gasoline Cartel," Journal of Industrial Economics, Wiley Blackwell, vol. 62(2), pages 191-228, June.
    5. Lars-Hendrik Röller & Frode Steen, 2006. "On the Workings of a Cartel: Evidence from the Norwegian Cement Industry," American Economic Review, American Economic Association, vol. 96(1), pages 321-338, March.
    6. John Asker, 2010. "A Study of the Internal Organization of a Bidding Cartel," American Economic Review, American Economic Association, vol. 100(3), pages 724-762, June.
    7. John Asker & Heski Bar-Isaac, 2014. "Raising Retailers' Profits: On Vertical Practices and the Exclusion of Rivals," American Economic Review, American Economic Association, vol. 104(2), pages 672-686, February.
    8. Sahuguet, Nicolas & Walckiers, Alexis, 2017. "A theory of hub-and-spoke collusion," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 353-370.
    9. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2011. "Synth: An R Package for Synthetic Control Methods in Comparative Case Studies," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 42(i13).
    10. David P. Byrne & Nicolas de Roos, 2019. "Learning to Coordinate: A Study in Retail Gasoline," American Economic Review, American Economic Association, vol. 109(2), pages 591-619, February.
    11. Salvatore Piccolo & Jeanine Miklós-Thal, 2012. "Colluding through suppliers," RAND Journal of Economics, RAND Corporation, vol. 43(3), pages 492-513, September.
    12. Matthew S. Lewis, 2015. "Odd Prices at Retail Gasoline Stations: Focal Point Pricing and Tacit Collusion," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(3), pages 664-685, September.
    13. Nathan H. Miller & Matthew Osborne & Gloria Sheu, 2017. "Pass-through in a concentrated industry: empirical evidence and regulatory implications," RAND Journal of Economics, RAND Corporation, vol. 48(1), pages 69-93, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Robert Clark & Ignatius Horstmann & Jean-François Houde, 2021. "Hub and Spoke Cartels: Theory and Evidence from the Grocery Industry," NBER Working Papers 29253, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Robert Clark & Ignatius Horstmann & Jean-François Houde, 2021. "Hub and Spoke Cartels: Theory and Evidence from the Grocery Industry," NBER Working Papers 29253, National Bureau of Economic Research, Inc.
    2. Clark, Robert & Coviello, Decio & de Leverano, Adriano, 2020. "Complementary bidding and the collusive arrangement: Evidence from an antitrust investigation," ZEW Discussion Papers 20-052, ZEW - Leibniz Centre for European Economic Research.
    3. Granlund, David & Rudholm, Niklas, 2023. "Calculating the probability of collusion based on observed price patterns," Umeå Economic Studies 1014, Umeå University, Department of Economics, revised 13 Oct 2023.
    4. Clark, Robert & Fabiilli, Christopher & Lasio, Laura, 2022. "Collusion in the US generic drug industry," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    5. Andreoli-Versbach, Patrick & Franck, Jens-Uwe, 2015. "Endogenous price commitment, sticky and leadership pricing: Evidence from the Italian petrol market," International Journal of Industrial Organization, Elsevier, vol. 40(C), pages 32-48.
    6. Marcel Wieting & Geza Sapi, 2021. "Algorithms in the Marketplace: An Empirical Analysis of Automated Pricing in E-Commerce," Working Papers 21-06, NET Institute.
    7. Robert Clark & Decio Coviello & Jean-Fran�ois Gauthier & Art Shneyerov, 2018. "Bid Rigging and Entry Deterrence in Public Procurement: Evidence from an Investigation into Collusion and Corruption in Quebec," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 34(3), pages 301-363.
    8. Matthew Weinberg & Gloria Sheu & Nathan Miller, 2019. "Oligopolistic Price Leadership and Mergers: An Empirical Model of the U.S. Beer Industry," 2019 Meeting Papers 1210, Society for Economic Dynamics.
    9. Porter, Robert H., 2020. "Mergers and coordinated effects," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    10. 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.
    11. Andreas Freitag & Catherine Roux & Christian Thöni, 2021. "Communication And Market Sharing: An Experiment On The Exchange Of Soft And Hard Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 175-198, February.
    12. Daniel Albalate & Germà Bel & Ferran A. Mazaira-Font, 2020. "Ensuring Stability, Accuracy and Meaningfulness in Synthetic Control Methods: The Regularized SHAP-Distance Method," IREA Working Papers 202005, University of Barcelona, Research Institute of Applied Economics, revised Apr 2020.
    13. Bruno Ferman & Cristine Pinto & Vitor Possebom, 2020. "Cherry Picking with Synthetic Controls," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(2), pages 510-532, March.
    14. Sadeghi, Ali & Kibler, Ewald, 2022. "Do bankruptcy laws matter for entrepreneurship? A Synthetic Control Method analysis of a bankruptcy reform in Finland," Journal of Business Venturing Insights, Elsevier, vol. 18(C).
    15. Dennis Shen & Peng Ding & Jasjeet Sekhon & Bin Yu, 2022. "Same Root Different Leaves: Time Series and Cross-Sectional Methods in Panel Data," Papers 2207.14481, arXiv.org, revised Oct 2022.
    16. César Martinelli & Marco Vega, 2019. "The Economic Legacy of General Velasco: Long-Term Consequences of Interventionism," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 42(84), pages 102-133.
    17. Silvia Marchesi & Tania Masi, 2019. "Sovereign risk after sovereign restructuring. Private and official default," Working Papers 423, University of Milano-Bicocca, Department of Economics, revised Nov 2019.
    18. Michał Marcin Kobierecki & Michał Pierzgalski, 2022. "Sports Mega-Events and Economic Growth: A Synthetic Control Approach," Journal of Sports Economics, , vol. 23(5), pages 567-597, June.
    19. David P. Brown & Andrew Eckert, 2022. "Pricing Patterns in Wholesale Electricity Markets: Unilateral Market Power or Coordinated Behavior?," Journal of Industrial Economics, Wiley Blackwell, vol. 70(1), pages 168-216, March.
    20. Johanna Catherine Maclean & Brendan Saloner, 2018. "Substance Use Treatment Provider Behavior and Healthcare Reform: Evidence from Massachusetts," Health Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 76-101, January.

    More about this item

    Keywords

    antitrust; Hub-and-Spoke collusion; vertical restraints;
    All these keywords.

    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
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uwo:uwowop:20216. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://economics.uwo.ca/research/research_papers/department_working_papers.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.