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Market Structure and Supply Shocks: Evidence from Mining Disasters

Author

Listed:
  • Hinnerk Gnutzmann

    (Leibniz University Hannover)

  • Oskar Kowalewksi

    (IESEG School of Management (LEM-CNRS-UMR 9221))

  • Piotr Spiewanowski

    (Institute of Economics, Polish Academy of Sciences)

Abstract

This paper provides new evidence on how imperfectly competitive markets with excess capacity mitigate the adverse impact of supply shocks on prices. We study the potash market, which is controlled by a syndicate that assigns output quotas in proportion to production capacity of its members. This sharing rule creates incentives for excess capacity investment. Hence, it insulates the market from the impact of extreme events. Using a novel data set of potash mine disasters, we show that permanent or long-term loss of up to 4% of global or 20% of country production capacity does not affect the production levels and the commodity prices.

Suggested Citation

  • Hinnerk Gnutzmann & Oskar Kowalewksi & Piotr Spiewanowski, 2018. "Market Structure and Supply Shocks: Evidence from Mining Disasters," Working Papers 2018-ACF-01, IESEG School of Management.
    • Handle: RePEc:ies:wpaper:f201801
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    File URL: https://www.ieseg.fr/wp-content/uploads/2012/03/2018-ACF-01_Kowalewski.pdf
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    Cited by:

    1. is not listed on IDEAS
    2. repec:ags:aaea22:343748 is not listed on IDEAS
    3. Muller Paul & Böhm Michael & Csillag Péter & Donati Michele & Drut Marion & Ferrer-Pérez Hugo & Gauvrit Lisa & Gil Jose M. & Hoang Viet & Malak-Rawlikowska Agata & Mattas Konstadinos & Napasintuwong O, 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.
    4. Hadachek, Jeffrey & Ma, Meilin, 2024. "Risk Externalities in Vertical Supply Chains," 2024 Annual Meeting, July 28-30, New Orleans, LA 343748, Agricultural and Applied Economics Association.
    5. Kowalewski, Oskar & Śpiewanowski, Piotr, 2020. "Stock market response to potash mine disasters," Journal of Commodity Markets, Elsevier, vol. 20(C).

    More about this item

    Keywords

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    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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