3 ms·

This illustrates a simple idea in economics: cartels are hard to maintain because participants will look out for their own self-interest.

davidvaughan 13y ago
Indeed, and by coincidence Izabella Kaminska published an interesting piece on why that's true with reference to cryptocurencies yesterday: http://ftalphaville.ft.com/2014/01/24/1750472/why-its-tough-being-in-an-altcoin-cartel/ http://ftalphaville.ft.com/2014/01/24/1750472/why-its-tough-...
HarryHirsch 13y ago
I don't know the literature, and what assumptions they make in there, but out in the real world the lightbulb cartel lasted from 1924 till 1942 or thereabouts. The keyword to look for is "Phoebus Cartel". Also, recently in the news: the Silicon Valley wage-fixing cartel. They may be hard to maintain, but they do spring up and may exert power while alive.
- ama729 13y ago
  Phoebus was indeed established in 1924 but: 1) There is a scientific basis for the 10.000 hours, the "greatest" achievement generally attributed to Phoebus[1]: > For a supply voltage V near the rated voltage of the lamp: Light output is approximately proportional to V 3.4 Power consumption is approximately proportional to V 1.6 Lifetime is approximately proportional to V −16 Color temperature is approximately proportional to V 0.42[88] 2) According wikipedia (and this page: http://www.uwcc.wisc.edu/icic/def-hist/history/famous.html http://www.uwcc.wisc.edu/icic/def-hist/history/famous.html )[2]: > In the late 1920s a Swedish-Danish-Norwegian union of companies (the North European Luma Co-op Society) began planning an independent manufacturing centre. Economic and legal threats by Phoebus did not achieve the desired effect, and in 1931 the Scandinavians produced and sold lamps at a considerably lower price than Phoebus. [1] http://en.wikipedia.org/wiki/Lightbulb#Light_output_and_lifetime http://en.wikipedia.org/wiki/Lightbulb#Light_output_and_life... [2] http://en.wikipedia.org/wiki/Phoebus_cartel#Demise http://en.wikipedia.org/wiki/Phoebus_cartel#Demise
- notdrunkatall 13y ago
  According to the section entitled "Demise": >In the late 1920s a Swedish-Danish-Norwegian union of companies (the North European Luma Co-op Society) began planning an independent manufacturing centre. Economic and legal threats by Phoebus did not achieve the desired effect, and in 1931 the Scandinavians produced and sold lamps at a considerably lower price than Phoebus. They are, in fact, difficult to maintain. That doesn't mean impossible, but your chances of maintaining a cartel in a free market drop drastically within the first few years, if not the first few months. And let's not fail to consider the fact that the economy back then was much less globalized, and therefore much easier to cartelize then it is today.
- cynicalkane 13y ago
  The Silicon Valley thing was no-poaching agreements between a few companies, not an explicit cartel. Which is bad but not nearly as bad.
hessenwolf 13y ago
Really, though, we can only examine the sample space of failed cartels.

davidvaughan 13y ago

Indeed, and by coincidence Izabella Kaminska published an interesting piece on why that's true with reference to cryptocurencies yesterday: http://ftalphaville.ft.com/2014/01/24/1750472/why-its-tough-being-in-an-altcoin-cartel/ http://ftalphaville.ft.com/2014/01/24/1750472/why-its-tough-...

HarryHirsch 13y ago

I don't know the literature, and what assumptions they make in there, but out in the real world the lightbulb cartel lasted from 1924 till 1942 or thereabouts. The keyword to look for is "Phoebus Cartel". Also, recently in the news: the Silicon Valley wage-fixing cartel. They may be hard to maintain, but they do spring up and may exert power while alive.

ama729 13y ago
Phoebus was indeed established in 1924 but: 1) There is a scientific basis for the 10.000 hours, the "greatest" achievement generally attributed to Phoebus[1]: > For a supply voltage V near the rated voltage of the lamp: Light output is approximately proportional to V 3.4 Power consumption is approximately proportional to V 1.6 Lifetime is approximately proportional to V −16 Color temperature is approximately proportional to V 0.42[88] 2) According wikipedia (and this page: http://www.uwcc.wisc.edu/icic/def-hist/history/famous.html http://www.uwcc.wisc.edu/icic/def-hist/history/famous.html )[2]: > In the late 1920s a Swedish-Danish-Norwegian union of companies (the North European Luma Co-op Society) began planning an independent manufacturing centre. Economic and legal threats by Phoebus did not achieve the desired effect, and in 1931 the Scandinavians produced and sold lamps at a considerably lower price than Phoebus. [1] http://en.wikipedia.org/wiki/Lightbulb#Light_output_and_lifetime http://en.wikipedia.org/wiki/Lightbulb#Light_output_and_life... [2] http://en.wikipedia.org/wiki/Phoebus_cartel#Demise http://en.wikipedia.org/wiki/Phoebus_cartel#Demise
notdrunkatall 13y ago
According to the section entitled "Demise": >In the late 1920s a Swedish-Danish-Norwegian union of companies (the North European Luma Co-op Society) began planning an independent manufacturing centre. Economic and legal threats by Phoebus did not achieve the desired effect, and in 1931 the Scandinavians produced and sold lamps at a considerably lower price than Phoebus. They are, in fact, difficult to maintain. That doesn't mean impossible, but your chances of maintaining a cartel in a free market drop drastically within the first few years, if not the first few months. And let's not fail to consider the fact that the economy back then was much less globalized, and therefore much easier to cartelize then it is today.
cynicalkane 13y ago
The Silicon Valley thing was no-poaching agreements between a few companies, not an explicit cartel. Which is bad but not nearly as bad.

hessenwolf 13y ago

Really, though, we can only examine the sample space of failed cartels.