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The Death of a Market: Standard Oil and the Demise of 19th Century Crude Oil Exchanges

The Death of a Market: Standard Oil and the Demise of 19th Century Crude Oil Exchanges From the mid-1870s through 1895, a commoditiesmarket in oil existed. Although its organizationwas primitive, it offered the varieties of commoditycontracts familiar today. In 1895, Standard Oilannounced that it would no longer use the OilExchange to set prices offered to producers. Thisraises a fascinating question, why was an efficientmechanism for price discovery discarded in favor ofinternal pricing by Standard Oil? Threepossibilities are explored to explain the market'sdeath: the role of Standard's monopsony power,transactions costs, and Standard's desire toeliminate the threat of crude producers formingcartels. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

The Death of a Market: Standard Oil and the Demise of 19th Century Crude Oil Exchanges

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References (21)

Publisher
Springer Journals
Copyright
Copyright © 1998 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
DOI
10.1023/A:1007795128137
Publisher site
See Article on Publisher Site

Abstract

From the mid-1870s through 1895, a commoditiesmarket in oil existed. Although its organizationwas primitive, it offered the varieties of commoditycontracts familiar today. In 1895, Standard Oilannounced that it would no longer use the OilExchange to set prices offered to producers. Thisraises a fascinating question, why was an efficientmechanism for price discovery discarded in favor ofinternal pricing by Standard Oil? Threepossibilities are explored to explain the market'sdeath: the role of Standard's monopsony power,transactions costs, and Standard's desire toeliminate the threat of crude producers formingcartels.

Journal

Review of Industrial Organization – Springer Journals

Published: Oct 6, 2004

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