Oligopoly in International Commodity Markets: The Case of Co ee and Its Unintended Crisis

Exploiting the historical variations in the structure of the international co ee bean market, I separately identify the e ects of an international cartel agreement and the emergence of a fringe exporting country on the market power and the commodity's price. The results suggest that, of the 75-percent drop in the real co ee price between 1988 and 2001, the cartel's breakdown explains 49 points and the emergence of Vietnam as a major exporter explains another 9 points. I discuss lessons of unintended consequences as well as opportunities for harmonization in public policies concerning trade, competition, development aid, and foreign direct investment. JEL Classi cation: D43, F12, F13, F14, F35, F51, F53, G13, L11, L13, L41, O13, O16, O19, Q17. ∗Anderson School of Management, UCLA. E-mail: [email protected]. For valuable suggestions, I thank Daniel Ackerberg, Andrew Ainslie, Bruce Carlin, Harold Demsetz, Je rey Dubin, Sebastian Edwards, Eric Fisher, Paola Giuliano, Jinyong Hahn, Hugo Hopenhayn, Ari Kang, Lawrence Karp, Edward Leamer, Rosa Matzkin, Ayako Obashi, Je rey Perlo , John Riley, Connan Snider, Raphael Thomadsen, Aaron Tornell, So a Berto Villas-Boas, Romain Wacziarg, and Mark Wright, as well as the seminar participants at the 4th Empirical Investigations in Trade and Investment Conference organized by FREIT, the 10th Annual Trans-Atlantic Doctoral Conference at London Business School, UC Berkeley, and UCLA. Financial support from the ITO Foundation, the Nozawa Fellowship, and the UCLA CIBER are gratefully acknowledged.