Hub-and-Spoke Cartels: Theory and Evidence from the Grocery Industry
Robert Clark, Ig Horstmann, Jean-François Houde
American Economic Review · 2024 · Volume 114 · Issue 3
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.
Keywords
Price Level, Inflation, Deflation, Antitrust Law, Monopoly, Monopolization Strategies, Transactional Relationships, Contracts and Reputation, Networks, Firm Organization and Market Structure, Vertical Restraints, Resale Price Maintenance, Quantity Discounts, Retail and Wholesale Trade, e-Commerce
Enable JavaScript for citation tools and additional paper interactions.