International Copper Cartel
Encyclopedia
The varied difficulties experienced by the copper industry after the depths of the Great Depression
were followed by the idea of getting relief through some form of collective action
in order to reduce the intensity of competition. In this way on March, 28th, 1935, the International Copper Cartel (ICC) was formed. There were five members in the cartel
and two friendly foreign subsidiaries. The voting members were: Anaconda, Kennecott, Roan Antilope (Mufulira), Rhokana (Rhodesia) and Katanga, while the non voting members were Bor (Yugoslavia) and Rio Tinto (Spain). All these account for more than half of the refining copper market. The main difference between this and the previous copper cartels is that the ICC members did not want to set uniform prices. Rather, they merely wanted to influence prices indirectly and smooth out wide price fluctuations (Walters, 1944). It is interesting to note that the ICC was never reproached for charging exorbitant prices, as opposite as what had happened with the previous cartels. Indeed, in Herfindahl’s opinion the cartel did not have any significant effect on price.
Herfindahl (1959) posit that the cartel members returned to the Nash-Cournot competition once the pivotal or trigger price was exceeded. On the other hand, Montero and Guzmán (2005) have posit that the cooperative behavior could have continued in booms, but using output-expanding strategies in order to restrict the entry of the competitive fringe. Although currently both hypothesis are open to discussion, Guzman (2007) shows through an empirical test that Montero and Guzmán's appears more likely to describe the ICC's behavior during booms.
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
were followed by the idea of getting relief through some form of collective action
Collective action
Collective action is the pursuit of a goal or set of goals by more than one person. It is a term which has formulations and theories in many areas of the social sciences.-In sociology:...
in order to reduce the intensity of competition. In this way on March, 28th, 1935, the International Copper Cartel (ICC) was formed. There were five members in the cartel
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...
and two friendly foreign subsidiaries. The voting members were: Anaconda, Kennecott, Roan Antilope (Mufulira), Rhokana (Rhodesia) and Katanga, while the non voting members were Bor (Yugoslavia) and Rio Tinto (Spain). All these account for more than half of the refining copper market. The main difference between this and the previous copper cartels is that the ICC members did not want to set uniform prices. Rather, they merely wanted to influence prices indirectly and smooth out wide price fluctuations (Walters, 1944). It is interesting to note that the ICC was never reproached for charging exorbitant prices, as opposite as what had happened with the previous cartels. Indeed, in Herfindahl’s opinion the cartel did not have any significant effect on price.
Herfindahl (1959) posit that the cartel members returned to the Nash-Cournot competition once the pivotal or trigger price was exceeded. On the other hand, Montero and Guzmán (2005) have posit that the cooperative behavior could have continued in booms, but using output-expanding strategies in order to restrict the entry of the competitive fringe. Although currently both hypothesis are open to discussion, Guzman (2007) shows through an empirical test that Montero and Guzmán's appears more likely to describe the ICC's behavior during booms.
Further reading
- Herfindahl, O.C. (1959). Copper Costs and Prices: 1870 – 1957. The Johns Hopkins Press, Baltimore.
- Walters, A. (1944). The International Copper Cartel. Southern Economic Journal 11, 133-156.
- Montero, J.-P. and Guzmán, J.I. Welfare-enhancing collusion in the presence of a competitive fringe.
- Guzmán, J.I. (2007). The International Copper Cartel, 1935–1939: the good cartel? Working paper, Mining Center, Catholic University of Chile