OPEC and other commodity cartels: a comparison

The economic literature provides specific characteristics for cartels. Alth ough the theory of international cartels is not well developed in the liter ature, and every cartel is unique, some of these characteristics exist in e ach cartel. This study investigates the existence of these characteristics in six known commodity cartels including OPEC. In addition, it compares the oil companies' cartel, 'the Seven Sisters', to OPEC, and summarizes the fi ndings of OPEC econometric models developed in the literature in the last 2 5 years and concludes that the results do not support cartel or competitive models for OPEC. Although other cartels are more successful than OPEC, man y books and articles in economics use OPEC as a cartel example. Neither sta tistical tests nor theory support the popular use of OPEC as a cartel examp le. Indeed, this article concludes that OPEC is composed of Saudi Arabia, t he dominant world producer, plus several distinct sub-groups and that separ ate models are required to explain the behavior of each. Assigning the powe r of some OPEC members to OPEC has caused confusion about its behavior. Rec ent OPEC success is attributed to political, natural, and technical capacit y limitations in the oil fields that prevented countries from cheating on t heir quota. In other words, OPEC adherence to the quota, except for Saudi A rabia, is anything but voluntary. (C) 2000 Elsevier Science Ltd. All rights reserved.