Abstract
How does a monopsony influence market outcomes if future supplies are responsive to current prices? When neither production nor shipments coincide with spot-market sales, monopsonists can manipulate current prices to alter future supply, potentially achieving higher collusive profits. This dynamic strategy suggests that standard models may underestimate the effect of monopsonistic cartels on the input market. This paper examines the historical case of the U.S. meatpacking cartel, which manipulated market prices to attract large cattle shipments, then exploited the inelastic spot-market supply to obtain the input materials at lower prices. The analyses leverage exogenous regulatory changes that forced the cartel to switch from a dynamic to a static strategy. I develop and estimate a structural model of the wholesale cattle market under static cartel strategy. I then quantify the effect of dynamic cartel manipulation by comparing the empirical market outcomes with counterfactuals under the static model. I find that cartel manipulation harmed cattle sellers by enabling the cartel to buy fewer cattle at low prices than it would have under a static model. The manipulation strategy also harmed downstream consumers by increasing beef prices and thus total household food expenditures.