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Cartels in the long run lead to the expansion of activities outside of the sphere of influence near the cartel. Also, futures markets generally cover variations

Cartels in the long run lead to the expansion of activities outside of the sphere of influence near the cartel. Also, futures markets generally cover variations of price, especially with a highly storable product like maple syrup. But in the short term, it's probably in the interests of small suppliers to have the cartel. Of course there is always a market incentive to defect, but since the cartel is backed by QC, I highly doubt that she'll get away with this.

mabbo 11y ago
Having governments enforce your cartel certain helps keep the outside activities to a minimum. A free market system with futures, and competition, etc, can indeed help deal with variation of prices and supply. But it still is a free market, in which price is determined by supply and demand. Producers are at the whim of the market in terms of what they make. With a cartel, supply is controlled near-absolutely, and therefore price can be controlled. The cartel can choose the price at which expected revenue/profits are maximized- often a price that lowers total sales, but increases total revenue (as revenue is price * sales). This is why I say that the Federation is terrible for consumers (who don't seem to care much) but great for producers- even the ones being told to cut back how much they produce. The Quebec government has an incentive to enforce the cartel- higher syrup prices means higher exports, more money coming into Quebec, which is all taxed. Yep. It's awful for guys like me who want to goddamn soak their pancakes in the gold stuff. It's great if you happen to own 100 acres of Maple trees. Even if you're told to pretend you own 80.
reality_czech 11y ago
Yes, exactly this. Across the border in the US, farmers are starting to produce a lot more maple syrup. And there is no cartel here. http://www.economist.com/news/finance-and-economics/21677990-american-forces-are-freeing-canadian-icon-captivity-sticky-situation http://www.economist.com/news/finance-and-economics/21677990... As the article points out: "keeping maple syrup expensive limits demand and encourages substitution" (of corn syrup). Meanwhile, "production is outpacing what the Federation can sell. Its “strategic reserve” has swollen to 25m litres of syrup—almost a year’s worth of sales. As America’s output grows, the organisation will have to cut its members’ quotas, stockpile ever more of Quebec’s harvest, or allow prices to fall."

mabbo 11y ago

Having governments enforce your cartel certain helps keep the outside activities to a minimum. A free market system with futures, and competition, etc, can indeed help deal with variation of prices and supply. But it still is a free market, in which price is determined by supply and demand. Producers are at the whim of the market in terms of what they make. With a cartel, supply is controlled near-absolutely, and therefore price can be controlled. The cartel can choose the price at which expected revenue/profits are maximized- often a price that lowers total sales, but increases total revenue (as revenue is price * sales). This is why I say that the Federation is terrible for consumers (who don't seem to care much) but great for producers- even the ones being told to cut back how much they produce. The Quebec government has an incentive to enforce the cartel- higher syrup prices means higher exports, more money coming into Quebec, which is all taxed. Yep. It's awful for guys like me who want to goddamn soak their pancakes in the gold stuff. It's great if you happen to own 100 acres of Maple trees. Even if you're told to pretend you own 80.

reality_czech 11y ago

Yes, exactly this. Across the border in the US, farmers are starting to produce a lot more maple syrup. And there is no cartel here. http://www.economist.com/news/finance-and-economics/21677990-american-forces-are-freeing-canadian-icon-captivity-sticky-situation http://www.economist.com/news/finance-and-economics/21677990... As the article points out: "keeping maple syrup expensive limits demand and encourages substitution" (of corn syrup). Meanwhile, "production is outpacing what the Federation can sell. Its “strategic reserve” has swollen to 25m litres of syrup—almost a year’s worth of sales. As America’s output grows, the organisation will have to cut its members’ quotas, stockpile ever more of Quebec’s harvest, or allow prices to fall."