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Market Structure and Resilience: Evidence from Potash Mine Disasters

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  • Hinnerk Gnutzmann
  • Oskar Kowalewski
  • Piotr Śpiewanowski

Abstract

What drives the resilience of markets to disasters? We study syndicates, a form of legal cartel that assigns market share based on production capacity. This creates incentives for excess capacity investment, and may insulate the market from the impact of extreme events. The potash industry, controlled by a syndicate and subject to mine disasters generating exogenous capacity shocks, provides an ideal setting for testing the hypothesis. We find evidence suggesting that even large capacity losses—averaging 3% of global capacity—do not cause production shortfalls or a price response. Such resilience is not observed in more competitive commodity markets.

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  • Hinnerk Gnutzmann & Oskar Kowalewski & Piotr Śpiewanowski, 2020. "Market Structure and Resilience: Evidence from Potash Mine Disasters," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(3), pages 911-933, May.
    • Handle: RePEc:wly:ajagec:v:102:y:2020:i:3:p:911-933
    DOI: 10.1093/ajae/aaz041
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    1. Muller Paul & Böhm Michael & Gauvrit Lisa & Csillag Péter & Török Áron & Donati Michele & Veneziani Mario & Drut Marion & Bellassen Valentin & Ferrer-Pérez Hugo & Gil Jose M. & Hoang Viet & Nguyen An , 2021. "Are Certified Supply Chains More Socially Sustainable? A Bargaining Power Analysis," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 19(2), pages 177-192, December.
    2. Kowalewski, Oskar & Śpiewanowski, Piotr, 2020. "Stock market response to potash mine disasters," Journal of Commodity Markets, Elsevier, vol. 20(C).

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    More about this item

    JEL classification:

    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources

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