MULTIMARKET CONTACT AND COLLUSION IN THE BETA CAROTENE AND THIAMINE CARTELS

Open Access
Author:
Lengerich, Christopher Towles
Area of Honors:
Economics
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Robert Clifford Marshall, Thesis Supervisor
  • David Shapiro, Honors Advisor
Keywords:
  • thiamine
  • B1
  • beta carotene
  • asymmetric auctions
Abstract:
It is rare for a cartel that employs a market share allocation scheme to allow a member firm to gain market share at the expense of another member. Nevertheless, this was the case when Hoffman-LaRoche, the leading producer of the vitamin beta carotene, accommodated the growth of the smaller firm BASF at direct cost to its own market share. Using a novel extension of an asymmetric first-price auction model, it is found that the Roche-BASF accommodation cannot be explained by single-market contact alone. Moreover, it is found that multimarket contact with the thiamine industry may explain Hoffman-LaRoche’s unorthodox behavior. Applications to anti-trust enforcement are discussed.