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Market structure and resilience: Evidence from potash mine disasters

Abstract : What drives the resilience of markets to disasters? We study syndicates, a form of legal cartel that assigns market share based on production capacity. This creates incentives for excess capacity investment, and may insulate the market from the impact of extreme events. The potash industry, controlled by a syndicate and subject to mine disasters generating exogenous capacity shocks, provides an ideal setting for testing the hypothesis. We find evidence suggesting that even large capacity losses—averaging 3% of global capacity—do not cause production shortfalls or a price response. Such resilience is not observed in more competitive commodity markets.
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Submitted on : Thursday, March 5, 2020 - 10:34:18 AM
Last modification on : Tuesday, April 12, 2022 - 4:12:04 PM

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Hinnerk Gnutzmann, Oskar Kowalewski, Piotr Śpiewanowski. Market structure and resilience: Evidence from potash mine disasters. American Journal of Agricultural Economics, Oxford University Press (OUP), 2019, ⟨10.1093/ajae/aaz041⟩. ⟨hal-02499256⟩



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