Economics & Finance / Economic Theory / Microeconomics

Why a Cartel Actually Made Cement Cheaper? (Norway's Shocking Secret)

Lars-Hendrik Röller, Frode Steen

In 1923, Norway's cement industry formed a legal cartel. By 1968, it had become a bizarre economic monster. This video, based on the groundbreaking research by Lars-Hendrik Röller and Frode Steen from the American Economic Review, reveals the counterintuitive mechanics of this cartel. Instead of raising prices for consumers, the cartel's unique 'capacity-based sharing rule' created a perverse incentive: companies built massive, wasteful factories to grab a bigger slice of the domestic market. They flooded the world with cement, often selling it below cost. The result? A jaw-dropping 150% production surge while domestic demand only grew 50%. Consumers actually benefited from lower prices, while the cartel itself bled money on exports. We break down the data, the welfare analysis, and the shocking conclusion: the government's 1968 decision to allow a merger into a monopoly, while better than the cartel, left over $12 million in potential welfare gains on the table. Discover how a 'failed' cartel accidentally helped its own customers, and why competition, not monopoly, would have been the real winner.