Historical and Experimental Examination of Government- Sponsored Cartels

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This project contributes valuable new insights into the behavior of firms in government-sponsored cartels and pioneers a new methodology in economic history by linking laboratory experiments with analysis of important historical questions. Part of the new research involves further empirical analysis of the formation of the government-sponsored citrus cartel, the structuring of firm production quotas within cartels, and the characteristics of those firms that violate and those that adhere to their quota allotments. Another part of the research involves the development of models of the observed cartels and the design of experiments to test the models in the context of naturally- occurring institutions. The methodologically research is especially exciting because it addresses a fundamental problem with historical research. Models developed to "explain" historical events often cannot be tested for external validity without application to independent data. Yet, it is generally the case in historical analysis that such independent data arenot available. The advantage of laboratory experiments is that the researcher can replicate a microcosm of the historical event in the laboratory to offer independent verification. The project addresses a gap in our understanding of firm behavior under government-sponsored cartels both from a historical perspective and from the perspective of current regulatory policy. There has been little historical analysis of the individual behavior of firms in government-sponsored cartels. This is an important gap in our understanding because industries are always looking to the government for protection from competitive pressures. We need to know a great deal more about how individual firms have behaved under regulation in the past in order to make well-informed policy in this area.