Competition, Collusion, and Spatial Sales Patterns: Theory and Evidence*

Abstract

This article studies competition in markets with transport costs and capacity constraints. Using a rich micro‐level data set of the cement industry in Germany, we study a cartel breakdown to identify the effect of competition on transport distances. We find that when firms compete, they more often serve more distant customers. Moreover, the transport distance also varies in the ratio of capacity relative to demand, but only if firms compete and not when they coordinate their sales. We provide a theoretical model of spatial competition with capacity constraints that rationalizes the empirical results.