Vertical Restraints in the Bromine Cartel: The Role of Distributors in Facilitating Collusion

37 Pages Posted: 27 Jun 2007 Last revised: 20 Feb 2021

See all articles by Margaret C. Levenstein

Margaret C. Levenstein

University of Michigan at Ann Arbor - Survey Research Center; The Stephen M. Ross School of Business at the University of Michigan, Business Economics and Public Policy

Date Written: July 1993

Abstract

From 1885 to 1902 manufacturers and distributors in the American bromine industry cooperated to increase prices and profits. Like many sectors of the American economy at the time, the bromine industry was made up a large number of small manufacturers and a small number of national distributors. The manufacturers agreed to pool their output and sell only to two distributors. The distributors accumulated excess inventories rather than let the market price fall, but then used those inventories as a threat to deter cheating and new entry. Industry participants designed contracts to balance fluctuations in the costs and benefits from cheating. These contracts succeeded in stabilizing collusion until the entry of new, vertically integrated, mass production firm led to its demise.

Suggested Citation

Levenstein, Margaret C., Vertical Restraints in the Bromine Cartel: The Role of Distributors in Facilitating Collusion (July 1993). NBER Working Paper No. h0049, Available at SSRN: https://ssrn.com/abstract=995454

Margaret C. Levenstein (Contact Author)

University of Michigan at Ann Arbor - Survey Research Center ( email )

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HOME PAGE: http://www-personal.umich.edu/~maggiel

The Stephen M. Ross School of Business at the University of Michigan, Business Economics and Public Policy

Ann Arbor, MI 48109
United States
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