A Study of Cartel Stability: The Joint Executive Committee, 1880-1886

Abstract

This article employs weekly time series data on the Joint Executive Committee railroad cartelfrom 1880 to 1886 to test empirically the proposition that observed prices reflected switches from collusive to noncooperative behavior.An equilibrium model of dynamic oligopoly with asymmetric firms, together with explicit functionalform assumptions about costs and demand, determines the estimating equations and stochastic structure of the econometric model.The hypothesis that no switch took place, so that price and quantity movements were solely attributable to exogenous shifts in the demand and cost functions, is then tested against this alternative and rejected.