Tariffs, strategy, and structure: Competition and collusion in the Ontariopetroleum industry, 1870-1880

The 1858 discovery of crude oil in Ontario led to the development of a refi ning industry initially composed of many small firms. Ontario's refiners re lied upon generous tariff protection in order to compete with cheaper, high er-quality imports. We apply a regime-switching model to the pattern of mon thly wholesale prices to find the extent to which trade policy affected col lusive efforts. Tariff protection encouraged collusion, but ease of entry r esulted 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.