We hypothesize a particular source of cartel instability and explore its relevance to
understanding cartel dynamics. The cartel instability is rooted in the observation that, upon
cartel formation, the relative positions of firms are often fixed which may lead some growthconscious
members to be discontent. This incongruity between a cartel member’s allocated
market share and its desired market share may result in systematic deviations and the eventual
collapse of the cartel. This hypothesis is then taken to the German cement cartel of 1991-
2002. We argue that Readymix was such a discontent cartel member and, using a rich pricing
data set, are able to characterize how Readymix deviated, how other firms responded, and
how it led to the collapse of the cartel.
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