Abstract
We develop some elementary measures of cartel stability, using OPEC as a case study, to evaluate whether behaviour in a market can be characterized as cooperative or competitive. Common views among economists are that OPEC is either not a viable cooperative organization or that Saudi Arabia is the swing producer holding OPEC together. We apply the concept of ‘reserve sacrifice’ and ‘capacity sacrifice’ ratios and also use the variability of production to analyse OPEC behaviour. The analysis is based on annual data for the 10 most important OPEC countries from 1973–85. Our empirical tests indicate that cooperation among the principal OPEC nations has been fairly great over the entire period.
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