Real Price Collusion Requires the Government
Want to get worked up about price collusion in the oil industry? Don't waste your time. No study has ever found collusion effects that raised US gasoline prices more than a few percent, and only for a very short period of time. The reason is that in a free market, there is too much incentive for new entrants undercutting a price collusion attempt. Railroads and airlines have probably the most severe economic incentives to collude, and they have never pulled it off for any period of time EXCEPT when the government stepped in to enforce the arrangement (e.g, airline controls pre-deregulation).
If you want to see a real cartel at work raising prices at the expense of consumers, check out this from the Mises Blog:
The raisin agricultural marketing order (AMO), with roots in the
Depression-era Agricultural Marketing Agreement Act, is rationalized as
a way to "stabilize" prices. However, it allows the Raisin
Administration Committee (RAC), controlled by producers, to determine
how much of each crop can be sold, with the rest forced into storage.
That power to jointly restrict output to raise price makes it a cartel.
A cartel with so many members would not usually succeed, and the mere
attempt would be prosecuted if antitrust laws were applied, but AMOs
are enforced by the government, through the USDA...The RAC "stabilization" is accomplished by restricting sales, often
substantially. "Free tonnage" has been as low as 53% of the crop in
2001, and less than 80% in most years. That helps producers by harming
consumers, turning price "stabilization" into price enhancement....The raisin cartel's effects on American consumers can also be seen
in the gap between the "free tonnage" prices and "reserve pool" prices
for raisins destined for low value markets. In 2001, those prices were
$877.50 per ton versus $250 per ton; in 1998, it was $1250 versus $357;
in 1984 and 1994, the differential approached 10 to 1.
