| Abstract |
I investigate how explicit cartels, known as “shipping conferences”, in a global container shipping
market facilitated the formation of one of the largest globally integrated markets through entry, exit, and
shipbuilding investment of shipping firms. Using a novel data, I develop and construct a structural model
and find that the cartels shifted shipping prices by 20-50% and encouraged firms’ entry and investment. In
the counterfactual, I find that cartels would increase producer surplus while slightly decreasing consumer
surplus, then may increase social welfare by encouraging firms’ entry and shipbuilding investment. This
would validate industry policies controlling prices and quantities in the early stage of the new industry,
which may not be always harmful. Investigating hypothetical allocation rules supporting large or small
firms, I find that the actual rule based on tonnage shares is the best to maximize social welfare.
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