Following the structure of many commodity markets, we consider a few large firms and a competitive fringe of many small suppliers choosing quantities in an infinite-horizon setting subject to demand shocks. We show that a collusive agreement among the large firms may not only bring an output...

The commodity price boom that emerged in 2004 has proved far more persevering than its predecessors of 1950 and 1973. Some analysts have suggested that it may represent the start of a "supercycle" caused by the voracious raw materials demand from China and other emerging economies, with prices...