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The Dynamics of a Stable Cartel: The Railroad Express 1851-1913

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  • Grossman, Peter Z

Abstract

The railroad express was probably the most successful cartel in U.S. business history. The key to its stability lay in the fact that collusion was largely an effort to create a cost-reducing distribution network. Because cost was dependent on collusion, the five cartel members could both underprice entrants and punish defectors. It is shown that, in a Bertrand-type price war, colluding firms could effectively drive a defector into bankruptcy. As a result, the express controlled its market and remained a stable organization for more than half a century. Copyright 1996 by Oxford University Press.

Suggested Citation

  • Grossman, Peter Z, 1996. "The Dynamics of a Stable Cartel: The Railroad Express 1851-1913," Economic Inquiry, Western Economic Association International, vol. 34(2), pages 220-236, April.
    • Handle: RePEc:oup:ecinqu:v:34:y:1996:i:2:p:220-36
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    Cited by:

    1. Argenton, Cédric, 2019. "Colluding on excluding," European Economic Review, Elsevier, vol. 113(C), pages 194-206.
    2. John M. Connor, 2003. "Private International Cartels: Effectiveness, Welfare, and Anticartel Enforcement," Working Papers 03-12, Purdue University, College of Agriculture, Department of Agricultural Economics.
    3. Brad R. Humphreys & Jane E. Ruseski, 2009. "Monitoring Cartel Behavior and Stability: Evidence from NCAA Football," Southern Economic Journal, John Wiley & Sons, vol. 75(3), pages 720-735, January.

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