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Cartel price announcements: The vitamins industry

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  • Marshall, Robert C.
  • Marx, Leslie M.
  • Raiff, Matthew E.

Abstract

The primary manufacturers of vitamins admitted to participating in international market-share-agreement cartels for several years during the 1990s. Their announced price increases appeared in leading trade journals. We show that price announcements during the cartel period, and the lead times before these prices took effect, were fundamentally different in character from price announcements when explicit collusion was less likely. These differences are consistent with our model of price announcements where we account for the importance to the cartel of buyer acceptance of, or resistance to, a price increase. Acceptance avoids costly market-share reallocations among members of an explicit cartel. Logit estimates show that after 1985, the likelihood of a price announcement is largely driven by the length of time between announcements, rather than cost or demand factors, suggesting that the price announcements after 1985 stem from cartel meetings.

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  • Marshall, Robert C. & Marx, Leslie M. & Raiff, Matthew E., 2008. "Cartel price announcements: The vitamins industry," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 762-802, May.
    • Handle: RePEc:eee:indorg:v:26:y:2008:i:3:p:762-802
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    Cited by:

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    3. Willem Boshoff & Stefan Frübing & Kai Hüschelrath, 2018. "Information exchange through non-binding advance price announcements: an antitrust analysis," European Journal of Law and Economics, Springer, vol. 45(3), pages 439-468, June.
    4. Thomas Bourveau & Guoman She & Alminas Žaldokas, 2020. "Corporate Disclosure as a Tacit Coordination Mechanism: Evidence from Cartel Enforcement Regulations," Journal of Accounting Research, Wiley Blackwell, vol. 58(2), pages 295-332, May.
    5. Pierluigi Sabbatini, 2016. "The Coordinated Effect of a Merger with Balanced Sharing of Collusive Profits," Journal of Industry, Competition and Trade, Springer, vol. 16(3), pages 345-371, September.
    6. 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.
    7. Escobar, Juan F. & Llanes, Gastón, 2018. "Cooperation dynamics in repeated games of adverse selection," Journal of Economic Theory, Elsevier, vol. 176(C), pages 408-443.
    8. Iossa, Elisabetta & Loertscher, Simon & Marx, Leslie & Rey, Patrick, 2020. "Collusive Market Allocations," CEPR Discussion Papers 14563, C.E.P.R. Discussion Papers.
    9. Johannes Paha, 2012. "Using accounting data in cartel damage calculations: blessing or menace?," European Journal of Law and Economics, Springer, vol. 34(2), pages 241-263, October.
    10. H. Peter Boswijk & Maurice J. G. Bun & Maarten Pieter Schinkel, 2019. "Cartel dating," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 34(1), pages 26-42, January.
    11. Chen, Gang & Rytter, Niels G.M. & Jiang, Liping & Nielsen, Peter & Jensen, Lars, 2017. "Pre-announcements of price increase intentions in liner shipping spot markets," Transportation Research Part A: Policy and Practice, Elsevier, vol. 95(C), pages 109-125.
    12. Marc Escrihuela‐Villar & Walter Ferrarese, 2022. "Asymmetric input contracts under price leadership," Manchester School, University of Manchester, vol. 90(1), pages 77-91, January.
    13. Shakun Datta Mago & Emmanuel Dechenaux, 2009. "Price leadership and firm size asymmetry: an experimental analysis," Experimental Economics, Springer;Economic Science Association, vol. 12(3), pages 289-317, September.
    14. Kumar, Vikram & Marshall, Robert C. & Marx, Leslie M. & Samkharadze, Lily, 2015. "Buyer resistance for cartel versus merger," International Journal of Industrial Organization, Elsevier, vol. 39(C), pages 71-80.
    15. David P. Brown & Andrew Eckert & James Lin, 2018. "Information and transparency in wholesale electricity markets: evidence from Alberta," Journal of Regulatory Economics, Springer, vol. 54(3), pages 292-330, December.
    16. Riemer P. Faber & Maarten C. W. Janssen, 2019. "On the Effects of Suggested Prices in Gasoline Markets," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(2), pages 676-705, April.
    17. Gustavo Gudino, 2021. "Self-Enforcing Price Leadership," Games, MDPI, vol. 12(3), pages 1-18, July.
    18. Gerlach, Heiko & Nguyen, Lan, 2021. "Price staggering in cartels," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    19. Kaplow, Louis, 2018. "Price-fixing policy," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 749-776.

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