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Market structure and resilience: Evidence from potash mine disasters
Archive ouverte : Article de revue
Edité par HAL CCSD ; Oxford University Press (OUP)
International audience. 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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