American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Hub-and-Spoke Cartels: Theory and Evidence from the Grocery Industry
American Economic Review
(pp. 783–814)
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. Using court documents and pricing data, we make three contributions: (i) we show that collusion was effective, increasing inflation by about 50 percent; (ii) we provide evidence that collusion existed at both ends of the supply chain; and (iii) we develop a model explaining why this form of collusion arose.Citation
Clark, Robert, Ig Horstmann, and Jean-François Houde. 2024. "Hub-and-Spoke Cartels: Theory and Evidence from the Grocery Industry." American Economic Review 114 (3): 783–814. DOI: 10.1257/aer.20211337Additional Materials
JEL Classification
- E31 Price Level; Inflation; Deflation
- K21 Antitrust Law
- L12 Monopoly; Monopolization Strategies
- L14 Transactional Relationships; Contracts and Reputation; Networks
- L22 Firm Organization and Market Structure
- L42 Vertical Restraints; Resale Price Maintenance; Quantity Discounts
- L81 Retail and Wholesale Trade; e-Commerce