Working Paper: NBER ID: w29253
Authors: Robert Clark; Ignatius Horstmann; Jean-François Houde
Abstract: Numerous recently uncovered cartels operated along the supply chain, with firms at one end facilitating collusion at the other – hub-and-spoke arrangements. These cartels are hard to rationalize because they induce double marginalization and higher costs. We examine Canada’s alleged bread cartel and provide the first comprehensive analysis of hub-and-spoke collusion. We make three contributions: i) Using court documents and pricing data we provide evidence that collusion existed at both ends of the supply chain, ii) we show that collusion was effective, increasing inflation by about 40% and iii) we provide a model explaining why this form of collusion arose.
Keywords: hub-and-spoke cartels; collusion; grocery industry; Canada; price fixing
JEL Codes: L11; L14; L41; L42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| market structure and supplier-retailer dynamics (L11) | incentives to collude (D43) |
| suppliers and retailers involvement (L81) | maintaining supracompetitive margins (D43) |
| presence of the cartel (L12) | price of bread (P22) |
| market structure (D49) | effectiveness of collusion (D74) |