Hub-and-Spoke Cartels: Theory and Evidence from the Grocery Industry
American Economic Review
vol. 114,
no. 3, March 2024
(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