Mineral Economics

, Volume 31, Issue 1–2, pp 113–125 | Cite as

The International Copper Cartel, 1935–1939: the good cartel?

  • Juan Ignacio Guzmán
Original Paper


A legacy of the pre-Great Depression period was the development of new copper capacity outside the USA. In order to avoid the utilization of this excess capacity in a competitive and possibly pyrrhic way, on March 28, 1935, the International Copper Cartel was formed. While production of cartel members was limited by the use of quotas in times of lower demand, during booms, the cartel removed all quotas in order to restrict the entry of the competitive fringe into the industry. In fact, many authors have considered the latter as a return to non-cooperative conduct. An alternative view, introduced by Montero and Guzmán (J Ind Econ 58(1):106–126, 2010), is that cooperation among members in booms could have been related to output-expanding strategies with the purpose of restricting entry of the competitive fringe in the industry through their own output expansion.

In this paper, a theoretical model is developed in order to differentiate between cartel behavior in the presence of a competitive fringe during booms when firms are not cooperating. It shows that the price elasticity of the cartel supply should be smaller in booms than during recessions, when a non-cooperative behavior is considered in booms, while this may or may not be the case if firms continue cooperating—through an output-expanding cooperation—during booms. The price elasticity of the International Copper Cartel supply is then estimated using an econometric model, and found to be significantly larger in booms than in recessions. This supports the conclusion that members of the cartel cooperated during both booms and recessions. This finding raises the possibility that the International Copper Cartel of 1935–1939 actually could have enhanced social welfare by reducing price volatility, while also having little effect on the secular level of prices.


Cartel Copper Price elasticity of supply 

JEL classification

L12 L72 N50 Q33 


  1. Agostini C (2006) Estimating market power in the US copper industry. Rev Ind Organ 28(1):17–39CrossRefGoogle Scholar
  2. Atchade DO, Thoms J (2006) The future of OPEC. Market dynamics and organizational challenges. Working Paper, Swiss Federal Institute of Technology, LausanneGoogle Scholar
  3. Barger H, Schurr SM (1944) The mining industries, 1899–1939: a study of output, employment, and productivity. National Bureau of Economic Research, New YorkGoogle Scholar
  4. Birchard R (1940) Copper in the Katanga region of the Belgian Congo. Econ Geogr 16(4):429–436CrossRefGoogle Scholar
  5. Bittermann H (1934) Elasticity of supply. Am Econ Rev 24(3):417–429Google Scholar
  6. Davis G, Tilton J (2003) Should developing countries renounce mining? A perspective on the debate. Working Paper, The International Council on Mining and Metals (ICMM), LondonGoogle Scholar
  7. Elliott WY, May E, Rowe JWF, Skelton A, Wallace D (1937) International control in the non-ferrous metals. The Macmillan Company, New YorkGoogle Scholar
  8. Ericsson M, Tegen A (2016) Global PGM mining during 40 years—a stable corporate landscape of oligopolistic control. Miner Econ 29:29–36CrossRefGoogle Scholar
  9. Griffin JM (1985) OPEC behavior: a test of alternative hypotheses. Am Econ Rev 75(5):954–963Google Scholar
  10. Herfindahl O (1959) Copper costs and prices. The John Hopkins University Press, Baltimore, pp 1870–1957Google Scholar
  11. Hexner E (1946) International cartels. University of North Carolina Press, Chapel HillGoogle Scholar
  12. Kinghorn J, Nielsen R (2004) A practice without defenders: the price effects of cartelization. In: Grossman P (ed) How cartels endure and how they fail: studies of industrial collusion. Edward Elgar Publishing Limited, Northampton, pp 130–143Google Scholar
  13. Klass M, Burrows J, Beggs S (1980) International minerals cartels and embargoes: policy implications for the United States. Charles River Associates, Praeger PublishersGoogle Scholar
  14. Labys W (1980) Market structure, bargaining power and resource price formation. Lexington Books, LexingtonGoogle Scholar
  15. Montero J-P, Guzmán JI (2010) Output-expanding collusion in the presence of a competitive fringe. J Ind Econ 58(1):106–126CrossRefGoogle Scholar
  16. National Bureau of Economic Research (2006) NBER Macrohistory Database. Accessed 8 Sept 2006
  17. Newbery D (1984) Manipulation of futures markets by a dominant producer. In: Anderson R (ed) The industrial organization of futures markets. Lexington Books, MarylandGoogle Scholar
  18. Pindyck R (1979) The cartelization of world commodity markets. Am Econ Rev Pap Proc 69(2):154–158Google Scholar
  19. Radetzki M (1977) Mineral commodity stabilisation: the producers’ view. Resour Policy 3(2):118–126CrossRefGoogle Scholar
  20. Röller L-H, Steen F (2006) On the workings of a cartel: evidence from the Norwegian cement industry. Am Econ Rev 96(1):321–338CrossRefGoogle Scholar
  21. Schultz H (1927) Theoretical considerations relating to supply. J Polit Econ 35(4):437–464CrossRefGoogle Scholar
  22. Temporary National Economic Committee Hearings (1941) Investigation of concentration of economic power, part 25, cartels. U.S. Government Printing Office, Washington, D.C.Google Scholar
  23. Tilton J, Guzman JI (2016) Mineral economics and policy. Resources for the Future, New YorkGoogle Scholar
  24. U.S. Federal Trade Commission (1947) Report on the copper industry. U.S. Government Printing Office, Washington, D.C.Google Scholar
  25. Van Duyne C (1975) Commodity cartels and the theory of derived demand. Kyklos 28(3):597–612CrossRefGoogle Scholar
  26. Walters A (1944) The International Copper Cartel. South Econ J 11(2):133–156CrossRefGoogle Scholar

Copyright information

© Springer-Verlag GmbH Germany 2017

Authors and Affiliations

  1. 1.Mining Department at the Catholic University of ChileSantiagoChile

Personalised recommendations