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Cartel Quotas under Majority Rule

  • Cave, Jonathan
  • Salant, Stephen W

The authors examine the choice of quotas by legal volume-restricting organizations: cartels, commodity agreements, agricultural marketing boards, and prorationing boards. Unlike their illegal counterparts, legal cartels have published regulations and broader enforcement capabilities. However, differences in costs and size among cartel members still make quota selection contentious. Conflicts over quotas are typically resolved by voting. Side-payments to influence votes are prohibited. The authors examine the predicted effects of this real-world voting institution on prices and welfare. They also deduce the economic consequences of exogenous political changes, such as alterations in the voting weights or in the identity of the voters. Copyright 1995 by American Economic Association.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 85 (1995)
Issue (Month): 1 (March)
Pages: 82-102

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Handle: RePEc:aea:aecrev:v:85:y:1995:i:1:p:82-102
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