Skip to main content

Collusive Investments in Technological Compatibility: Lessons from U.S. Railroads in the Late 19th Century

Publication ,  Journal Article
Gross, DP
Published in: Management Science
December 2020

Collusion is widely condemned for its negative effects on consumer welfare and market efficiency. In this paper, I show that collusion may also in some cases facilitate the creation of unexpected new sources of value. I bring this possibility into focus through the lens of a historical episode from the 19th century, when colluding railroads in the U.S. South converted 13,000 miles of railroad track to standard gauge over the course of two days in 1886, integrating the South into the national transportation network. Route-level freight traffic data reveal that the gauge change caused a large shift in market share from steamships to railroads, but did not affect total shipments or prices on these routes. Guided by these results, I develop a model of compatibility choice in a collusive market and argue that collusion may have enabled the gauge change to take place as it did, while also tempering the effects on prices and total shipments. This paper was accepted by Joshua Gans, business strategy.

Duke Scholars

Altmetric Attention Stats
Dimensions Citation Stats

Published In

Management Science

DOI

EISSN

1526-5501

ISSN

0025-1909

Publication Date

December 2020

Volume

66

Issue

12

Start / End Page

5683 / 5700

Publisher

Institute for Operations Research and the Management Sciences (INFORMS)

Related Subject Headings

  • Operations Research
  • 46 Information and computing sciences
  • 38 Economics
  • 35 Commerce, management, tourism and services
  • 15 Commerce, Management, Tourism and Services
  • 08 Information and Computing Sciences
 

Citation

APA
Chicago
ICMJE
MLA
NLM
Gross, D. P. (2020). Collusive Investments in Technological Compatibility: Lessons from U.S. Railroads in the Late 19th Century. Management Science, 66(12), 5683–5700. https://doi.org/10.1287/mnsc.2019.3504
Gross, Daniel P. “Collusive Investments in Technological Compatibility: Lessons from U.S. Railroads in the Late 19th Century.” Management Science 66, no. 12 (December 2020): 5683–5700. https://doi.org/10.1287/mnsc.2019.3504.
Gross, Daniel P. “Collusive Investments in Technological Compatibility: Lessons from U.S. Railroads in the Late 19th Century.” Management Science, vol. 66, no. 12, Institute for Operations Research and the Management Sciences (INFORMS), Dec. 2020, pp. 5683–700. Crossref, doi:10.1287/mnsc.2019.3504.
Gross DP. Collusive Investments in Technological Compatibility: Lessons from U.S. Railroads in the Late 19th Century. Management Science. Institute for Operations Research and the Management Sciences (INFORMS); 2020 Dec;66(12):5683–5700.

Published In

Management Science

DOI

EISSN

1526-5501

ISSN

0025-1909

Publication Date

December 2020

Volume

66

Issue

12

Start / End Page

5683 / 5700

Publisher

Institute for Operations Research and the Management Sciences (INFORMS)

Related Subject Headings

  • Operations Research
  • 46 Information and computing sciences
  • 38 Economics
  • 35 Commerce, management, tourism and services
  • 15 Commerce, Management, Tourism and Services
  • 08 Information and Computing Sciences