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TARIFFS, STRATEGY, AND STRUCTURE: COMPETITION AND COLLUSION IN THE ONTARIO PETROLEUM INDUSTRY, 1870–1880

Published online by Cambridge University Press:  13 August 2001

Hugh Grant  and
Henry Thille
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Abstract

The 1858 discovery of crude oil in Ontario led to the development of a refining industry initially composed of many small firms. Ontario's refiners relied upon generous tariff protection in order to compete with cheaper, higher-quality imports. We apply a regime-switching model to the pattern of monthly wholesale prices to find the extent to which trade policy affected collusive efforts. Tariff protection encouraged collusion, but ease of entry resulted in frequent price wars. An 1877 downward revision in tariffs, while reducing the gains to collusion, also reduced the likelihood of entry and supported efforts to rationalize capacity.

Type
Research Article
Information
The Journal of Economic History , Volume 61 , Issue 2 , June 2001 , pp. 390 - 413
Copyright
© 2001 Cambridge University Press

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