Rules, communication, and collusion: Narrative evidence from the sugar institute case

David Genesove*, Wallace P. Mullin

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

170 Scopus citations

Abstract

Detailed notes on weekly meetings of the sugar-refining cartel show how communication helps firms collude, and so highlight the deficiencies in the current formal theory of collusion. The Sugar Institute did not fix prices or output. Prices were increased by homogenizing business practices to make price cutting more transparent. Meetings were used to interpret and adapt the agreement, coordinate on jointly profitable actions, ensure unilateral actions were not misconstrued as cheating, and determine whether cheating had occurred. In contrast to established theories, cheating did occur, but sparked only limited retaliation, partly due to the contractual relations with selling agents. (JEL L13, L41).

Original languageAmerican English
Pages (from-to)379-398
Number of pages20
JournalAmerican Economic Review
Volume91
Issue number3
DOIs
StatePublished - Jun 2001

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