On the Workings of a Cartel: Evidence from the Norwegian Cement Industry
Using data on prices, production, and exports, we are able to identify marginal costs as well as the effectiveness of the Norwegian cement industry cartel. We find that our marginal cost estimates are very much in line with the detailed cost accounting data. We show that the cement cartel has been ineffective because the sharing rule induces "overproduction" and exporting below marginal costs. It is consumers -- not firms -- who benefit from the sharing rule. The ineffectiveness of the cartel was becoming so large that domestic welfare of a merger to monopoly would be positive around 1968, which is when the merger actually took place! We also show that competition would have resulted in even higher welfare gains over the entire sample.
Volume (Year): 96 (2006)
Issue (Month): 1 (March)
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- Carl Davidson & Raymond Deneckere, 1984.
"Excess Capacity and Collusion,"
675, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- James A. Brander & Richard Harris, 1983. "Anticipated Collusion and Excess Capacity," Working Papers 530, Queen's University, Department of Economics.
- Mukesh Eswaran, 1997. "Cartel Unity over the Business Cycle," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 644-72, August.
- Jean-Pierre Benoit & Vijay Krishna, 1987. "Dynamic Duopoly: Prices and Quantities," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 23-35.
- Aiginger, Karl & Pfaffermayr, Michael, 1997. "Looking at the Cost Side of "Monopoly."," Journal of Industrial Economics, Wiley Blackwell, vol. 45(3), pages 245-67, September.
- repec:kap:ejlwec:v:4:y:1997:i:1:p:73-92 is not listed on IDEAS
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