Citation

Discussion Paper Details

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Title: Cartels, Contracts and Centralization: The Transition to Futures Trading for Primary Commodities

Author(s): Jonathan Haskel

Publication Date: June 1995

Keyword(s): Cartel/Fringe Models, Contracting, Futures Makets and Search

Programme Area(s): Industrial Organization and International Trade and Regional Economics

Abstract: Trading in futures markets has grown substantially for many commodities. At the same time the power of many dominant producers has weakened and core prices have tended to fall towards those on the fringe. Existing cartel/fringe models fail to explain the difference between core and fringe prices and have no role for the development of futures trading. We present a cartel/fringe model that incorporates search and contracting. The model predicts that cartel prices exceed those on the fringe; that the cartel/fringe price differential narrows as futures trading increases; and that a move to contracting lowers market prices.

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Bibliographic Reference

Haskel, J. 1995. 'Cartels, Contracts and Centralization: The Transition to Futures Trading for Primary Commodities'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1193