A fragile truce


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Readers' comments



Travis B.

Is the Economist really lauding price collusion? What happened to classic X of supply and demand? The Economist should have adopted a different name for this article.

umghhh in reply to Travis B.

Well TE is not the magazine that it seemed to be when I started reading it. It has an agenda which strange enough is not quite so clear as some may think. I suppose that is also something that can really be expected anyway from a journal.
As for the price collusion. It is like with most of the things - most of he time this should be prevented and quite rightly it is seen as an unlawful activity. Yet in some cases a lots of pain is caused if you stick to the letter of law - the excess capacity is just a sign of a bubble. Possibly even a bubble caused by reckless Germans that allow for tax 'optimization' trough investment in shipping capacity build-up - yet again we see an ugly eye of German ueber-economy.... In any case if such bubble ruptures there is a lots of trouble - firms collapse etc. If they 'colude' to get back to 'normal' or let us call it economic levels of prices then it is only good for all - collapse in any industry is not only causing price adjustments but also a lots of chaos and knock-on effects. Not sure if that is what we need in current chaos (which incidentally seems to be causing TE a lots of fun to announce, describe and promote...).

jason9139 in reply to Travis B.

Another classic of supply and demand is the elasticity or flexibility of the supply and demand. The demand in this case is extremely flexible, because it can change instantly (giant recession hits), however supply-increases lags because of real-world limitations in the ability to churn out these super-post-panamex ships that Maersk and others invested in. This creates oversupply, as the author points out, which can lead to predatory pricing or price wars, which threatens to lower the supply in the medium and long term from collapsing companies. Rather than fight it out alone, these companies have chosen to share costs, ships, and more if possible.


Its time for a firm to heavily invest in natural gas engines for their ships.

That way they can reduce their costs and compete on price!

First firm to do this widespread will see large growth assuming other firms continue to collude.

Thats my guess.

DrayNorton in reply to Travis B.

price collusion provides security of profits and therefore less risk to investors in a time of risky business.

get over it =).

The free market is never free as long as its cheaper to collude than to technologically advance.

Colluding increases short term profits. And shareholders almost exclusively only care about short term profits.


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