Market Power and Cartel Formation: Theory and an Empirical Test
Antitrust enforcement makes it difficult to test theories of cartel formation because most attempts to form cartels are blocked. However, federal laws allow U.S. produce growers to operate marketing cartels through devices called marketing orders. These cartels use quantity controls and quality standards to raise prices on fresh produce. Some growers have adopted marketing orders and others have not. This paper develops and tests a positive theory of the adoption of marketing orders. The theory suggests that growers in a region are more likely to adopt a marketing order if the demand for fresh produce is inelastic, the growers’ market share in the fresh market is large, there are barriers to entry and expansion, the fraction of the output the growers ship to the fresh market is not too large or too small, growers are homogeneous, and large cooperatives exist. Probit analyses support these hypotheses.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (909) 607-3041
Fax: (909) 621-8249
Web page: http://www.claremontmckenna.edu/rdschool/papers/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bartel, Ann P & Thomas, Lacy Glenn, 1985. "Direct and Indirect Effects of Regulation: A New Look at OSHA's Impact," Journal of Law and Economics, University of Chicago Press, vol. 28(1), pages 1-25, April.
- George J. Stigler, 1974. "Free Riders and Collective Action: An Appendix to Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 359-365, Autumn.
- Maloney, Michael T & McCormick, Robert E, 1982. "A Positive Theory of Environmental Quality Regulation," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 99-123, April.
- Dick, Andrew R, 1996. "When Are Cartels Stable Contracts?," Journal of Law and Economics, University of Chicago Press, vol. 39(1), pages 241-83, April.
- Gardner, Bruce L, 1987. "Causes of U.S. Farm Commodity Programs," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 290-310, April.
- Pashigian, B Peter, 1985. "Environmental Regulation: Whose Self-interests Are Being Protected?," Economic Inquiry, Western Economic Association International, vol. 23(4), pages 551-84, October.
When requesting a correction, please mention this item's handle: RePEc:clm:clmeco:2000-31. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.