Working Paper: CEPR ID: DP2828
Authors: Pedro L. Marn; Richard Sicotte
Abstract: There is a substantial theoretical literature on the potential effects of loyalty contracts, but a relative paucity of empirical work. This Paper employs the event study methodology to examine the effect of exclusionary contracts on firm performance in the ocean shipping industry. Shipping conferences - legal cartels exempt from antitrust laws - offered discounts to customers that patronized exclusively cartel member firms. The usage of these contracts was the subject of an extended legal and political struggle. We test for the impact of the most important events in this conflict on the stock returns of firms in the shipping industry. We find that some of these events resulted in significant changes in the firms? stock returns. Our evidence suggests that exclusive contracts may have contributed to market power in the shipping industry.
Keywords: event study; exclusive contracts; shipping conferences
JEL Codes: K21; L12; L42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Legal decision in 1958 (K36) | Stock returns (G12) |
| Legislative bill in 1961 (I19) | Stock returns (G12) |
| Exclusionary contracts (L14) | Firm performance (L25) |
| Anticipation of prohibitive regulation (G18) | Stock valuations (G19) |