Market Structure and Supply Shocks: Evidence from Mining Disasters

IÉSEG Working Paper Series 2018-ACF-01

43 Pages Posted: 30 Jan 2018 Last revised: 17 Apr 2018

See all articles by Hinnerk Gnutzmann

Hinnerk Gnutzmann

Leibniz Universität Hannover - Faculty of Economics and Management

Oskar Kowalewski

IESEG School of Management; LEM - CNRS 9221

Piotr Spiewanowski

Polish Academy of Sciences - Institute of Economics (INE PAN)

Date Written: January 22, 2018

Abstract

This paper provides new evidence on how imperfectly competitive markets with excess capacity mitigate the adverse impact of supply shocks on prices. We study the potash market, which is controlled by a syndicate that assigns output quotas in proportion to production capacity of its members. This sharing rule creates incentives for excess capacity investment. Hence, it insulates the market from the impact of extreme events. Using a novel data set of potash mine disasters, we show that permanent or long-term loss of up to 4% of global or 20% of country production capacity does not affect the production levels and the commodity prices.

Keywords: commodity prices, supply shocks, market structure, resilience, syndicates

JEL Classification: Q31, L13, Q54, L72

Suggested Citation

Gnutzmann, Hinnerk and Kowalewski, Oskar and Spiewanowski, Piotr, Market Structure and Supply Shocks: Evidence from Mining Disasters (January 22, 2018). IÉSEG Working Paper Series 2018-ACF-01, Available at SSRN: https://ssrn.com/abstract=3106757 or http://dx.doi.org/10.2139/ssrn.3106757

Hinnerk Gnutzmann

Leibniz Universität Hannover - Faculty of Economics and Management ( email )

Koenigsworther Platz 1
Hannover, 30167
Germany

HOME PAGE: http://www.gnutzmann.info

Oskar Kowalewski

IESEG School of Management ( email )

1 Parvis de La Défense
Socle de la Grande Arche
Paris La Défense cedex, 92044
France

HOME PAGE: http://www.ieseg.fr/en/faculty-and-research/professor/?id=1740

LEM - CNRS 9221 ( email )

Lille
France

HOME PAGE: http://lem.cnrs.fr/

Piotr Spiewanowski (Contact Author)

Polish Academy of Sciences - Institute of Economics (INE PAN) ( email )

Palace of Culture and Science
Pl. Defilad 1
Warsaw, 00-901
Poland

HOME PAGE: http://www.piotrspiewanowski.info

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