A Study of Cartel Stability: The Joint Economic Committee 1880 - 1886

Abstract

This paper employs weekly time series data on the Joint Economic Committee railroad cartel from 1880 to 1886 to empirically test the proposition that observed price wars represented a switch from collusive to noncooperative behavior. An equilibrium model of dynamic oligopoly with assymetric firms, together with explicit functional form assumptions about costs and demand, determines the estimating equations and stochastic structure of the econometric model. This hypothesis is tested against the alternative that no switch took place, so that price and quantity movements were solely attributable to exogenous shifts in the demand and cost functions.