Entry and Predation: British Shipping Cartels 1879-1929

44 Pages Posted: 8 Aug 2012 Last revised: 24 Dec 2022

See all articles by Fiona M. Scott Morton

Fiona M. Scott Morton

Yale School of Management; National Bureau of Economic Research (NBER)

Date Written: July 1996

Abstract

I examine the outcomes of cases of entry by merchant shipping lines into established markets around the turn of the century. These established markets are completely dominated by an incumbent cartel composed of several member shipping lines. The cartel makes the decision whether or not to begin a price war against the entrant; some entrants are formally admitted to the cartel without any conflict. I use characteristics of the entrant to predict whether or not the entrant will encounter a price war conditional on entering. I find that weaker entrants are fought, where weaker means less financial resources, experience, size, or poor trade conditions. The empirical results provide support for the long purse theory of predation. I discuss qualitative evidence such as predatory intent expressed in correspondence between cartel members which supports the empirical results. The results are also found to be robust to misclassification of the dependent variable which is a particular concern when dealing with historical data.

Suggested Citation

Scott Morton, Fiona M., Entry and Predation: British Shipping Cartels 1879-1929 (July 1996). NBER Working Paper No. w5663, Available at SSRN: https://ssrn.com/abstract=4332

Fiona M. Scott Morton (Contact Author)

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