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The JEC Revisited: Did Debt Undermine Stability?

Atlantic Economic Journal volume 37, pages 65–71 (2009)Cite this article

Abstract

The Joint Executive Committee (JEC), one of the most studied cartels in all of economics, was at best partially successful at maintaining collusion. The railroad cartel faced frequent breakdowns and re-contracting efforts. This paper considers the effects that large capital debt may have had on the members of the JEC. The JEC is compared to the express cartel of the period in which all firms were creditors. The latter had no breakdowns during the same period. It is shown through a small modification in an oligopolistic supergame that debt-burdened firms are less likely to maintain a stable cartel agreement than a cartel of creditors, a result that is consistent with the experience of these two cartels.

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Notes

  1. The list of references includes MacAvoy (1965); Ulen (1978); Porter (1983); Ellison (1994); Grossman (2004).

  2. Reported in the New York Times Nov 24, 1884, p.5.

  3. Reported in the New York Times, March 1, 1885, p. 5.

  4. There were five firms: American Express, Adams Express, Southern Express, United States Express and Wells Fargo & Co. Together they controlled over 80% of all express traffic (Grossman 1996). Information on the size of the portfolios emerged from a tax dispute between the Adams Express and the several states forced them to reveal the size of their portfolio; the information on the American Express portfolio comes from their archives (Grossman 2000).

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Authors and Affiliations

  1. College of Business, Butler University, 4600 Sunset Avenue, Indianapolis, IN, 46208, USA

    Peter Z. Grossman & Kathy Paulson Gjerde

Authors
  1. Peter Z. Grossman
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  2. Kathy Paulson Gjerde
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Correspondence to Peter Z. Grossman.

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Grossman, P.Z., Gjerde, K.P. The JEC Revisited: Did Debt Undermine Stability?. Atl Econ J 37, 65–71 (2009). https://doi.org/10.1007/s11293-008-9160-8

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  • DOI: https://doi.org/10.1007/s11293-008-9160-8

Keywords

  • Cartels
  • Oligopolistic supergames
  • The Joint Executive Committee
  • The railroad express

JEL

  • N71
  • L13
  • L60