Tariffs, Strategy, and Structure: Competition and Collusion in the Ontario Petroleum Industry, 1870???1880

Grant, Hugh; Thille, Henry

doi:10.1017/s0022050701028054

Cited by 17 publications

(6 citation statements)

References 18 publications

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“…To get a better grasp of the production share of each OPEC member, Table 2 reports statistics about oil production by each of the member countries. 12 Notice that the OPEC "core," which is formed by Saudi Arabia, the United Arab Emirates (U.A.E. ), Kuwait, Qatar, and Libya, accounts for over 50% of total OPEC production, with about 30% of OPEC's oil being produced by Saudi Arabia alone.…”

Section: Department Of Energy (Energy Information Agency 2007) P O mentioning

confidence: 99%

“…Third, from the institutional perspective, there is ample evidence that individual members frequently respond directly to other members' outputs in such a way that overall OPEC behavior vis-à-vis the world market remains roughly unchanged (see for instance Gately, 1989). 3 Modi…ed versions of the Green and Porter (1984) and Porter (1983a) methodology has been applied to study the U.S. airline industry (Brander and Zhang, 1993;Busse, 2002), the U.S. bromine industry (Levenstein, 1997), the U.S. online book sale market (Clay, Smith and Wol¤, 2004), Ontario's oil industry (Grant and Thille, 2001), the Australian coal mining companies behavior (Fleming, 2000), entry into the British merchant shipments in periods of price wars (Scott-Morton, 1997); and Spain's electricity market (Fabra and Toro, 2004). Yet, to the best of our knowledge, it has not been used to study OPEC's cartel stability.…”

Section: Introductionmentioning

confidence: 99%

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Testing for the cartel in OPEC: non-cooperative collusion or just non-cooperative?

Almoguera¹,

Douglas²,

Herrera³

2011

Oxford Review of Economic Policy

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This paper extends the framework of Green and Porter (1984) and Porter (1983a) to nest the case of a cartel (OPEC) faced by a competitive fringe (non-OPEC oil producers). Estimation of a simultaneous equation switching regression model allows us to examine which market structure better characterizes the world oil market during the 1974-2004 period and to test whether switches between collusive and noncooperative behavior occurred. The null hypothesis that no switch occurred is rejected in favor of the alternative that both cooperative and non-cooperative behavior was observed. We …nd that, although there were periods in which oil prices were measurably higher due to collusion among OPEC members, overall OPEC has not been e¤ective in systematically raising prices above Cournot competition levels. Our results suggest that, on average over the period of study, OPEC's behavior is best described as Cournot competition in the face of a competitive fringe constituted by non-OPEC producers.JEL Classi…cation: D4, L11.

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Section: Department Of Energy (Energy Information Agency 2007) P O mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Testing for the cartel in OPEC: non-cooperative collusion or just non-cooperative?

Almoguera¹,

Douglas²,

Herrera³

2011

Oxford Review of Economic Policy

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“…It is important, as a matter of anti-trust policy, that we learn to distinguish failed attempts that pave the way for future collusion from failed attempts that reflect the inherent difficulty of s ustaining collusion in a particular industry. One can speculate that there are a large number of industries that followed the pattern of the Canadian oil industry, in which the failure to sustain collusion led to consolidation of the industry (Grant and Thille, 2001). This has certainly been asserted about the attempts to control prices in the U.S. trusts of the late nineteenth and early twentieth centuries.…”

Section: Cartel Durationmentioning

confidence: 99%

What Determines Cartel Success?

Levenstein

Suslow

2006

Journal of Economic Literature

525

209

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Following George Stigler (1964), many economists assume that incentive problems undermine attempts b firms to collude to raise prices and restrict output. But the potential profits from collusion can create a powerful incentive as well. Theory cannot tell us, a priori, which effect will dominate: whether or when cartels succeed is thus an empirical question. We examine a wide variety of empirical studies of cartels to answer the following questions: (1) Can cartels succeed? (2) If so, for how long? (3) What impact do cartels have? (4) What causes cartels to break up? We conclude that many cartels do survive, and that the distribution of duration is bimodal. While the average duration of cartels across a range of studies is about five years, many cartels break up very quickly (i.e., in less than a year). But there are many others that last between five and ten years, and some that last decades. Limited evidence suggests that cartels are able to increase prices and profits, to varying degrees. Cartels can also affect other non-price variables, including advertising, innovation, investment, barriers to entry, and concentration. Cartels break up occasionally because of cheating or lack of effective monitoring, but the biggest challenges cartels face are entry and adjustment of the collusive agreement in response to changing economic conditions. Cartels that develop organizational structures that allow them the flexibility to respond to these changing conditions are more likely to survive. Price wars that erupt are often the result of bargaining issues that arise in such circumstances. Sophisticated cartel organizations are also able to develop multipronged strategies to monitor one another to deter cheating and a variety of interventions to increase barriers to entry.

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“…Whatever the biases involved, it is clear that cartels are not "short" or "long" lived; they are both. There are also industries that followed the pattern of the Canadian oil industry, in which the failure to sustain collusion led to consolidation of the industry (Grant and Thille 2001). In the next section, we look at this issue and its antitrust implications more closely.…”

Section: Contemporary International Cartels a "Type 1" Internationalmentioning

confidence: 99%

International Cartel Enforcement: Lessons from the 1990s

Evenett¹,

Levenstein²,

Suslow³

2001

Policy Research Working Papers

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ABSTRACT:The enforcement record of the 1990s has demonstrated that private international cartels are neither relics of the past nor do they always fall quickly under the weight of their own incentive problems. Of a sample of forty such cartels prosecuted by the United States and European Union in the 1990s, twenty-four lasted at least four years. And for the twenty cartels in this sample where sales data are available, the annual worldwide turnover in the affected products exceeded US$30billion. Prevailing national competition policies are oriented towards addressing harm done in domestic markets, and in some cases merely prohibit cartels without taking strong enforcement measures. In this paper we propose a series of reforms to national policies and steps to enhance international cooperation that will strengthen the deterrents against international cartelization. Furthermore, aggressive prosecution of cartels must be complemented by vigilance in other areas of competition policy. If not, firms will respond to the enhanced deterrents to cartelization by merging or by taking other measures that lessen competitive pressures.

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Tariffs, Strategy, and Structure: Competition and Collusion in the Ontario Petroleum Industry, 1870???1880

Cited by 17 publications

References 18 publications

Testing for the cartel in OPEC: non-cooperative collusion or just non-cooperative?

Testing for the cartel in OPEC: non-cooperative collusion or just non-cooperative?

What Determines Cartel Success?

International Cartel Enforcement: Lessons from the 1990s

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