Cartel Attributes and Cartel Performance : the Impact of Trade Associations

This paper employs a cartel policy experiment, the National Industrial Recovery Act (NIRA) of 1933, to examine whether industries that have trade associations in place prior to cartelization are more successful than those without them. Trade associations could potentially help industries better formulate effective cartel rules and could help with monitoring. We find that industries with trade associations were more successful in achieving the collusive outcome—proxied by either reductions in industry output or increases in industry prices—than those without. In fact, it appears that industries without trade associations were generally unable to successfully collude under the NIRA. Additionally, cartels that involved a trade association were more likely to have survived the NIRA’s compliance crisis during the spring of 1934 when collusion was lost throughout much of the program. These findings are consistent with economic theory which suggests that trade associations play important roles in helping industries achieve and maintain collusion.