IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-02436944.html
   My bibliography  Save this paper

Competition, collusion and spatial sales patterns – theory and evidence

Author

Listed:
  • Matthias Hunold

    (University of Siegen = Universität Siegen [Siegen])

  • Kai Hüschelrath

    (Centre for European Economic Research (Mannheim, Germany) - Zentrum für Europäische Wirtschaftsforschung (ZEW) - Universität Mannheim)

  • Ulrich Laitenberger

    (Centre for European Economic Research (Mannheim, Germany) - Zentrum für Europäische Wirtschaftsforschung (ZEW) - Universität Mannheim, SES - Département Sciences Economiques et Sociales - Télécom Paris - IMT - Institut Mines-Télécom [Paris] - IP Paris - Institut Polytechnique de Paris, ECOGE - Economie Gestion - I3 SES - Institut interdisciplinaire de l’innovation de Telecom Paris - Télécom Paris - IMT - Institut Mines-Télécom [Paris] - IP Paris - Institut Polytechnique de Paris - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique)

  • Johannes Muthers

    (JKU - University of Linz - Johannes Kepler Universität Linz)

Abstract

This article studies competition in markets with transport costs and capacity constraints. Using a rich micro-level data set of the cement industry in Germany, we study a cartel breakdown to identify the effect of competition on transport distances. We find that when firms compete, they more often serve more distant customers. Moreover, the transport distance also varies in the ratio of capacity relative to demand, but only if firms compete and not when they coordinate their sales. We provide a theoretical model of spatial competition with capacity constraints that rationalizes the empirical results.

Suggested Citation

  • Matthias Hunold & Kai Hüschelrath & Ulrich Laitenberger & Johannes Muthers, 2020. "Competition, collusion and spatial sales patterns – theory and evidence," Post-Print hal-02436944, HAL.
    • Handle: RePEc:hal:journl:hal-02436944
    DOI: 10.1111/joie.12237
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brander, James & Krugman, Paul, 1983. "A 'reciprocal dumping' model of international trade," Journal of International Economics, Elsevier, vol. 15(3-4), pages 313-321, November.
    2. Jean-Pierre Benoit & Vijay Krishna, 1987. "Dynamic Duopoly: Prices and Quantities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(1), pages 23-35.
    3. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-659, September.
    4. Kai Hüschelrath & Tobias Veith, 2014. "Cartel Detection in Procurement Markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 35(6), pages 404-422, September.
    5. Davidson, Carl & Deneckere, Raymond J, 1990. "Excess Capacity and Collusion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 521-541, August.
    6. Hector Perez-Saiz, 2015. "Building new plants or entering by acquisition? Firm heterogeneity and entry barriers in the U.S. cement industry," RAND Journal of Economics, RAND Corporation, vol. 46(3), pages 625-649, September.
    7. Robert Somogyi, 2013. "Bertrand-Edgeworth competition with substantial product differentiation," CERS-IE WORKING PAPERS 1332, Institute of Economics, Centre for Economic and Regional Studies.
    8. Pio Baake & Jörg Oechssler & Christoph Schenk, 1999. "Explaining cross-supplies," Journal of Economics, Springer, vol. 70(1), pages 37-60, February.
    9. Bejger, Sylwester, 2011. "Polish cement industry cartel- preliminary examination of collusion existence," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 4(1), pages 1-20, January.
    10. 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.
    11. John Asker, 2010. "A Study of the Internal Organization of a Bidding Cartel," American Economic Review, American Economic Association, vol. 100(3), pages 724-762, June.
    12. Hans W. Friederiszick & Lars-Hendrik Röller, 2010. "Quantification Of Harm In Damages Actions For Antitrust Infringements: Insights From German Cartel Cases," Journal of Competition Law and Economics, Oxford University Press, vol. 6(3), pages 595-618.
    13. Canoy, Marcel, 1996. "Product Differentiation in a Bertrand-Edgeworth Duopoly," Journal of Economic Theory, Elsevier, vol. 70(1), pages 158-179, July.
    14. Nathan H. Miller & Matthew Osborne, 2014. "Spatial differentiation and price discrimination in the cement industry: evidence from a structural model," RAND Journal of Economics, RAND Corporation, vol. 45(2), pages 221-247, June.
    15. Hunold, Matthias & Muthers, Johannes, 2019. "Spatial competition and price discrimination with capacity constraints," International Journal of Industrial Organization, Elsevier, vol. 67(C).
    16. Thisse, Jacques-Francois & Vives, Xavier, 1988. "On the Strategic Choice of Spatial Price Policy," American Economic Review, American Economic Association, vol. 78(1), pages 122-137, March.
    17. Alberto Salvo, 2010. "Inferring market power under the threat of entry: the case of the Brazilian cement industry," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 326-350, June.
    18. Ari Hyytinen & Frode Steen & Otto Toivanen, 2019. "An Anatomy of Cartel Contracts," The Economic Journal, Royal Economic Society, vol. 129(621), pages 2155-2191.
    19. Alberto Salvo, 2010. "Trade flows in a spatial oligopoly: gravity fits well, but what does it explain?," Canadian Journal of Economics, Canadian Economics Association, vol. 43(1), pages 63-96, February.
    20. Kai Hüschelrath & Tobias Veith, 2016. "Cartelization, Cartel Breakdown, and Price Behavior: Evidence from the German Cement Industry," Journal of Industry, Competition and Trade, Springer, vol. 16(1), pages 81-100, March.
    21. Sinitsyn, Maxim, 2009. "Price dispersion in duopolies with heterogeneous consumers," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 197-205, March.
    22. Sylwester Bejger, 2011. "Polish cement industry cartel - preliminary examination of collusion existence," Business and Economic Horizons (BEH), Prague Development Center, vol. 4(1), pages 88-107, January.
    23. Ulrich Blum, 2007. "The East German Cement Cartel: Cartel Efficiency and Policy After Economic Transformation," Eastern European Economics, Taylor & Francis Journals, vol. 45(6), pages 5-28, November.
    24. Hunold, Matthias & Muthers, Johannes, 2018. "Spatial Competition with Capacity Constraints and Subcontracting," DICE Discussion Papers 254, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), revised 2018.
    25. George Deltas & Alberto Salvo & Helder Vasconcelos, 2012. "Social-Welfare-Enhancing Collusion and Trade," Chapters, in: Joseph E. Harrington Jr & Yannis Katsoulacos (ed.), Recent Advances in the Analysis of Competition Policy and Regulation, chapter 7, Edward Elgar Publishing.
    26. Acemoglu, Daron & Bimpikis, Kostas & Ozdaglar, Asuman, 2009. "Price and capacity competition," Games and Economic Behavior, Elsevier, vol. 66(1), pages 1-26, May.
    27. Somogyi, Robert, 2020. "Bertrand–Edgeworth competition with substantial horizontal product differentiation," Mathematical Social Sciences, Elsevier, vol. 108(C), pages 27-37.
    28. Harrington, Joseph E. & Hüschelrath, Kai & Laitenberger, Ulrich & Smuda, Florian, 2015. "The discontent cartel member and cartel collapse: The case of the German cement cartel," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 106-119.
    29. Joseph E. Harrington & Kai Hüschelrath & Ulrich Laitenberger, 2018. "Rent sharing to control noncartel supply in the German cement market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(1), pages 149-166, March.
    30. George Deltas & Alberto Salvo & Helder Vasconcelos, 2012. "Consumer-surplus-enhancing collusion and trade," RAND Journal of Economics, RAND Corporation, vol. 43(2), pages 315-328, June.
    31. Stephen P. Ryan, 2012. "The Costs of Environmental Regulation in a Concentrated Industry," Econometrica, Econometric Society, vol. 80(3), pages 1019-1061, May.
    32. Nathan H. Miller & Matthew Osborne & Gloria Sheu, 2017. "Pass-through in a concentrated industry: empirical evidence and regulatory implications," RAND Journal of Economics, RAND Corporation, vol. 48(1), pages 69-93, March.
    33. Hüschelrath, Kai & Müller, Kathrin & Veith, Tobias, 2012. "Estimating damages from price-fixing: The value of transaction data," ZEW Discussion Papers 12-036, ZEW - Leibniz Centre for European Economic Research.
    34. Hans-Theo Normann & Elaine S. Tan, 2014. "Effects of different cartel policies: evidence from the German power-cable industry," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 23(4), pages 1037-1057.
    35. Maxim Sinitsyn, 2008. "Technical Note--Price Promotions in Asymmetric Duopolies with Heterogeneous Consumers," Management Science, INFORMS, vol. 54(12), pages 2081-2087, December.
    36. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hunold, Matthias & Muthers, Johannes, 2019. "Spatial competition and price discrimination with capacity constraints," International Journal of Industrial Organization, Elsevier, vol. 67(C).
    2. Matthias Hunold & Johannes Muthers, 2018. "Spatial Competition with Capacity Constraints and Subcontracting," Economics working papers 2018-13, Department of Economics, Johannes Kepler University Linz, Austria.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hunold, Matthias & Muthers, Johannes, 2019. "Spatial competition and price discrimination with capacity constraints," International Journal of Industrial Organization, Elsevier, vol. 67(C).
    2. Muthers, Johannes & Hunold, Matthias, 2017. "Capacity constrained price competition with transportation costs," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168248, Verein für Socialpolitik / German Economic Association.
    3. Hunold, Matthias & Muthers, Johannes, 2018. "Spatial Competition with Capacity Constraints and Subcontracting," DICE Discussion Papers 254, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), revised 2018.
    4. Joseph E. Harrington & Kai Hüschelrath & Ulrich Laitenberger, 2018. "Rent sharing to control noncartel supply in the German cement market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(1), pages 149-166, March.
    5. Fink, Nikolaus & Frübing, Stefan, 2015. "Legal and illegal cartels in the European cement industry," ZEW Discussion Papers 15-066, ZEW - Leibniz Centre for European Economic Research.
    6. Tetsuji Okazaki & Ken Onishi & Naoki Wakamori, 2022. "Excess Capacity And Effectiveness Of Policy Interventions: Evidence From The Cement Industry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(2), pages 883-915, May.
    7. Delina Agnosteva & Constantinos Syropoulos & Yoto V. Yotov, 2017. "Multimarket Linkages, Cartel Discipline and Trade Costs," CESifo Working Paper Series 6829, CESifo.
    8. Harrington, Joseph E. & Hüschelrath, Kai & Laitenberger, Ulrich & Smuda, Florian, 2015. "The discontent cartel member and cartel collapse: The case of the German cement cartel," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 106-119.
    9. Alberto Salvo, 2010. "Trade flows in a spatial oligopoly: gravity fits well, but what does it explain?," Canadian Journal of Economics, Canadian Economics Association, vol. 43(1), pages 63-96, February.
    10. Fabrizio Leone & Rocco Macchiavello & Tristan Reed, 2022. "Market size, markups and international price dispersion in the cement industry," CEP Discussion Papers dp1862, Centre for Economic Performance, LSE.
    11. Jeffrey T. Macher & Nathan H. Miller & Matthew Osborne, 2021. "Finding Mr. Schumpeter: technology adoption in the cement industry," RAND Journal of Economics, RAND Corporation, vol. 52(1), pages 78-99, March.
    12. Macchiavello, Rocco & Leone, Fabrizio & Reed, Tristan, 2021. "The Falling Price of Cement in Africa," CEPR Discussion Papers 16253, C.E.P.R. Discussion Papers.
    13. Jinho Jung & Juan Sesmero & Ralph Siebert, 2022. "A structural estimation of spatial differentiation and market power in input procurement," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(2), pages 613-644, March.
    14. van den Berg, Anita & Bos, Iwan, 2017. "Collusion in a price-quantity oligopoly," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 159-185.
    15. Somogyi, Robert, 2020. "Bertrand–Edgeworth competition with substantial horizontal product differentiation," Mathematical Social Sciences, Elsevier, vol. 108(C), pages 27-37.
    16. Hüschelrath, Kai & Veith, Tobias, 2011. "The impact of cartelization on pricing dynamics: Evidence from the German cement industry," ZEW Discussion Papers 11-067, ZEW - Leibniz Centre for European Economic Research.
    17. Suguru Otani, 2024. "Industry Dynamics with Cartels: The Case of the Container Shipping Industry," Discussion Paper Series DP2024-28, Research Institute for Economics & Business Administration, Kobe University.
    18. de Frutos, María-Ángeles & Fabra, Natalia, 2011. "Endogenous capacities and price competition: The role of demand uncertainty," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 399-411, July.
    19. Maxim Sinitsyn, 2020. "Evaluating horizontal mergers in the presence of price promotions," Quantitative Marketing and Economics (QME), Springer, vol. 18(1), pages 39-60, March.
    20. Mathur, Sameer & Sinitsyn, Maxim, 2013. "Price promotions in emerging markets," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 404-416.

    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-02436944. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.