Capacity constraints , cartel , cement , transport costs
Abstract:
We study competition in markets with significant transport costs and capacity constraints. We compare the cases of price competition and coordination in a theoretical model and find that when firms compete, they more often serve more distant customers that are closer to plants of competitors. By means of a rich micro-level data set of the cement industry in Germany, we provide empirical evidence in support
of this result. Controlling for other potentially confounding factors, such as the number of production plants and demand, we find that the transport distances between suppliers and customers were on average significantly lower in cartel years
than in non-cartel years.
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