Abstract

http://ssrn.com/abstract=1872213
 
 

Citations (15)



 


 



Monopolization by 'Raising Rivals' Costs': The Standard Oil Case


Benjamin Klein


University of California, Los Angeles (UCLA) - Department of Economics

Elizabeth Granitz


Long Island University - Southhampton College

April 1, 1996

Journal of Law and Economics, Vol. 39, No. 1, 1996

Abstract:     
Standard monopolized the petroleum industry during the 1870s by cartelizing the stage of production where entry was difficult – petroleum transportation. Standard enforced the transportation cartel by shifting its refinery shipments among railroads to stabilize individual railroad market shares at collusively agreed on levels. This method of cartel policing was effective because Standard possessed a dominant share of refining, a dominance made possible with the assistance of the railroads. The railroads facilitated Standard's refinery acquisitions and prevented new refiner entry by charging disadvantageously high rates to non-Standard refiners. While Standard used its dominant position in refining to sell refined product at a monopoly price and to purchase crude oil at a monopsony price, Standard did not possess independent market power in refining. Whenever the transportation cartel broke down, Standard's pricing power vanished.

Number of Pages in PDF File: 48

JEL Classification: L41, K21

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Date posted: July 10, 2011  

Suggested Citation

Klein, Benjamin and Granitz, Elizabeth, Monopolization by 'Raising Rivals' Costs': The Standard Oil Case (April 1, 1996). Journal of Law and Economics, Vol. 39, No. 1, 1996. Available at SSRN: http://ssrn.com/abstract=1872213

Contact Information

Benjamin Klein (Contact Author)
University of California, Los Angeles (UCLA) - Department of Economics ( email )
1999 Avenue of the Stars
Suite 2500
Los Angeles, CA 90067-6028
United States
310-728-2025 (Phone)
310-728-2070 (Fax)
HOME PAGE: http://www.econ.ucla.edu/people/Faculty/Klein.html
Elizabeth Granitz
Long Island University - Southhampton College
Southhampton, NY 11968
United States
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