Do Price Wars Facilitate Collusion? A Study of the Bromine Cartel before World War I
Identifieur interne : 000908 ( Main/Exploration ); précédent : 000907; suivant : 000909Do Price Wars Facilitate Collusion? A Study of the Bromine Cartel before World War I
Auteurs : Margaret C. LevensteinSource :
- Explorations in Economic History [ 0014-4983 ] ; 1996.
English descriptors
- Teeft :
- Abreu, August, Average price, Bargaining price wars, Bromide, Bromide salts, Bromine, Bromine cartel, Bromine industry, Bromine pool, Bromine price wars, Bromine producers, Bromkonvention, Cambridge univ, Cartel, Cheating, Chemical company, Chemist, Collusion, Collusive, Collusive agreements, Collusive equilibria, Collusive equilibrium, Collusive success, Contractual relationships, Cooperative behavior, Coordination problems, Cournot, Cournot levels, December, Determinant, Deutsche, Deutsche bromkonvention, Discount rate, Drug reporter, Economic history, Economic theory, Edward mallinckrodt, Entire output, Equilibrium punishments, European market, Federal trade commission, Fudenberg, Geological survey, German bromine cartel, Higher prices, Imperfect, Imperfect monitoring, Imperfect monitoring price wars, Industry participants, Information structure, Jant, Julius grossmann, Lamoreaux, Levenstein, Mallinckrodt, Mallinckrodt chemical works, Manufacturing chemists, Marginal costs, Market price, Merck, Merger wave, Midland, Midland chemical company, Monitoring problems, Neutral territory, November, October, Ohio river, Ohio river producers, Opdr, Osborn, Other firms, Other industries, Patent medicine producers, Pden, Pearce, Pharmaceutical products, Post street archives, Potassium bromide, Powers weightman, Price wars, Private information, Railroad price wars, Rosengarten sons, Secondary literature, Shields pool, Stable collusion, Stigler, Support collusion, Ulen, Weightman, West virginia.
Abstract
Abstract: This paper uses documentary records of the bromine cartel from 1885 to 1914 to evalu ate the contributions of noncooperative, repeated game models of collusion to our under standing of the determinants of cartel success and the causes of price wars. It finds that many of the variables that determine an industry’s ability to collude in these models—the discount rate, the information structure, the ability to design rewards and punishments, the beliefs and expectations of participants—were significant determinants of collusive success in the bromine industry as well as other late 19th century industries. It questions the explanation of price wars offered by these models that price wars are equilibrium punishments, implemented because of problems of imperfect monitoring. In 19th century industries, price wars were more likely to result from bargaining or coordination problems. Price wars resulting from imperfect monitoring tended to be short and shallow. As the bromine industry became more concentrated and gained experience working cooperatively, the cartel collected more information and developed alternative punishments to make the use of price war punishments even less likely.
Url:
DOI: 10.1006/exeh.1996.0005
Affiliations:
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It finds that many of the variables that determine an industry’s ability to collude in these models—the discount rate, the information structure, the ability to design rewards and punishments, the beliefs and expectations of participants—were significant determinants of collusive success in the bromine industry as well as other late 19th century industries. It questions the explanation of price wars offered by these models that price wars are equilibrium punishments, implemented because of problems of imperfect monitoring. In 19th century industries, price wars were more likely to result from bargaining or coordination problems. Price wars resulting from imperfect monitoring tended to be short and shallow. 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