American Shipping Cartels in the Pre-World War I Era

Abstract

This paper surveys the formation of the US shipping cartels (conferences) and their state of development before the onset of World War I. These cartels ranged from simple price agreements to very complex and revenue pooling agreements. The focus of the paper is to identify the factors that influence the choice of the cartel organizational form. We find that the degree of collusion is higher in routes in which entry of competing firms is less likely, in routes with fewer firms of relative unequal size, and in routes in which member firms have large global capacity. We also find that multi-market contact facilitates collusion, i.e., a cartel is more likely to be tight if its members are also interacting in many other routes. These results indicate that complex cartels, as opposed to simple rate agreements, are formed when organizational costs are lower and enforcement easier and more credible.