Gentlemanly Price-Fixing and Its Limits: Collusion and Competition in the U.S. Explosives Industry during the Civil War Era

Abstract

During the Civil War era, when the U.S. explosives industry was already dominated by a handful of firms, the leading manufacturers of black powder tried repeatedly–with mixed success–to fix prices in commercial and military markets. Their surviving correspondence reveals some of the dynamics of oligopolistic collusion and competition. In commercial markets, price-fixing by leading explosives makers was undermined not only by competition from small powder manufacturers but also by rivalry among their own selling agents. The same agency problems that made price-fixing more difficult, however, may have actually made it easier for manufacturers to sustain the social foundations of cooperation by allowing them to blame the failures of their agreements on forces outside their control. Maintaining cooperative relations over the long run proved useful to manufacturers in wartime military markets, in which price agreements were easier to sustain. But during the Civil War, the leading powder producers found that even successful collusion in the military supply business did not guarantee high profits, because government bureaus could prove to be demanding consumers.

‘An Indissoluble Mutual Destiny’: The North Staffordshire Potteries and the Limits of Regional Trade Associationalism

“…In contrast, the strategies of the largest firms in the industry were evolving in ways that required greater stability. Some were developing agency networks in marketing to gain greater control over demand, hurdling the barrier to cooperation identified by Wilson (2003) in his study of the US gunpowder industry. Others were integrating backwards into the sourcing and processing of raw materials, a few even switching from being buyers to being suppliers of inputs.…”