Is There Anti-competitive Behaviour in the Central Canadian Cement Industry? Testing Arbitrage Cost Hypotheses.

Allegations of anticompetitive behavior in the central Canadian cement industry have focused around the effects of cement producers' buying their downstream distributors. If indeed vertical integration is causing cement prices to rise, the relevant economic theories imply that the arbitrage cost of shipping cement to central Canada is greater than the cost of shipping cement from this region. The authors investigate this theory by econometrically estimating the relevant arbitrage costs. Their analysis supports the hypothesis that vertical integration has increased barriers to entry for cement in Toronto but it fails to support a similar hypothesis for Montreal.