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

Author

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  • Daniel Chaves
  • Marco Duarte

Abstract

We study the inner workings of a hub-and-spoke cartel in the Brazilian automotive fuel industry. Based on court documents and detailed price and sales data, we discuss how gas station owners (spokes) operating inside the federal capital received help from fuel distributors (hub) to reduce dispersion of and increase gasoline's retail price. We provide evidence that distributor cartel members benefited by raising wholesale prices while keeping competitors from supplying retail cartel members. We also provide theoretical foundations and empirical evidence for a new mechanism through which hubs help spokes: smoothing cost fluctuations.

Suggested Citation

  • Daniel Chaves & Marco Duarte, 2025. "The Inner Workings of a Hub-and-Spoke Cartel in the Automotive Fuel Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 17(1), pages 41-65, February.
    • Handle: RePEc:aea:aejmic:v:17:y:2025:i:1:p:41-65
    DOI: 10.1257/mic.20210250
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    1. 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.
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    Cited by:

    1. Yu & Hao, 2025. "Equilibrium Transition from Loss-Leader Competition: How Advertising Restrictions Facilitate Price Coordination in Chilean Pharmaceutical Retail," Papers 2512.22917, arXiv.org, revised Jun 2026.
    2. 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.

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    More about this item

    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
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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