Collusive Behavior in the Industrial Thread Industry

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Collusive Behavior in the Industrial Thread Industry Table of contents 1. Introduction……………………………………………………………………… 2 2. The Thread Industry 2.1 Market Structure………………………………………………………………. 2 2.1 The Agreements ……………………………………………………………….. 3 3. Economic Impact on Competition 3.1 The Nature of a Carte………………………………………………………………… 4 3.2 Welfare analysis ……………………………………………………………………… 5 4. The European Commission`s decision 4.1. The decision…………………………………………………………………….. 7 5. Conclusion………………………………………………………………………… 8 References………………………………………………………………………………. 9 1. Introduction The European Commission (EC) convicted…show more content…
There are for example different techniques to twist the yarns or types of finishing. Thread can also differ in size, tenacity, loop or breaking strength and color fastness (YIL Corporation, n.d./2010). This means thread can be differentiated easily, to satisfy customers’ needs and wishes. It is also important to emphasize that without differentiation the consumers are in the position to make a trade off in quality by switching to a company from an emerging country, like China, to get much lower prices due to local and undervalued labor costs (Athukorala, 2007). To sum it up, the industrial thread industry within the EEA is very competitive. The only striking factor is the production of a differentiated product which can be explained by the increasing competition from the East. The damage by the cartels can therefore be estimated to be very extensive, so it is now interesting to investigate what agreements were made by the cartel members. 2.2 The Agreements A competitive market is what an economy should strive for. It maximizes total welfare and benefits all parties. The textile industry itself is very competitive, so that it is impossible for individual firms to generate additional economic profits in the long run. Some companies would therefore find it very beneficial to coordinate their actions. For example they could reduce the quantity supplied, so that the market price would rise artificially. In the thread market there were two kinds of agreements

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