Sustainability of Collusion: Evidence from the Late 19th Century Basque Iron and Steel Industry

This paper presents evidence on actual collusive agreements from the late 19th Century iron and steel industry in Spain. We examine the minutes of the executive boards of two Basque firms, Altos Hornos de Bilbao and Vizcaya, to discuss the relevance of different factors on survival and failure of a number of explicit collusive agreements reached in the industry from 1886 to 1901. We find that collusion was more likely to break down in periods of falling demand, and that strong demand provides these agreements with stability. Additionally, we argue that the presence of centralized sales agencies, similar degrees of vertical integration among colluding firms, and tariff protection are factors that facilitate collusion.