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Cartels, Contracts and Centralization: The Transition to Futures Trading for Primary Commodities

Author

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  • J.E. Haskel
  • A. Powell

Abstract

Trading in futures markets has grown substantially for many commodities. At the same time the power of many dominant producers has weakened and core prices have tended to fall towards those on the fringe. Existing cartel/fringe models fail to explain the difference between core and fringe prices and have no role for the development of futures trading. We present a cartel/fringe model that incorporates search and contracting. The model predicts that cartel prices exceed those on the fringe; that the cartel/fringe price differential narrows as futures trading increases; and that a move to contracting lowers market prices.
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Suggested Citation

  • J.E. Haskel & A. Powell, 1994. "Cartels, Contracts and Centralization: The Transition to Futures Trading for Primary Commodities," Working Papers 329, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:329
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    Cited by:

    1. Gilbert, Christopher L., 1995. "International commodity control : retrospect and prospect," Policy Research Working Paper Series 1545, The World Bank.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels

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