D. Dewey (1979) argues that, when entry is free, it cannot be the case that firms collude in order to obtain monopoly rents. He advances an efficiency explanation for collusion. Using the structure-conduct-performance (SCP) paradigm, F.C.v.N. Fourie and A. Smith (1994) find, in sharp contrast, that the cartel is for monopoly. According to the SCP paradigm, structure determines conduct, which in turn, determines performance. This paper shows that Dewey’s efficiency criterion applies quite well to the South African cement cartel. Section 1 is a brief overview of the cement industry in South Africa. Section 2 shows that in spite of high concentration, an ‘all pervasive’ vertical integration (Fourie and Smith), and no imports, the structure of the South African cement industry is quite compatible with competition. Section 3 shows how Dewey’s efficiency criterion for cartels applies to the South African cement industry. Section 2 and 3 also show that Fourie and Smith’s analysis of industry structure and conduct is seriously flawed. Section 4 shows, in support of Dewey’s efficiency criterion for cartels, that no obvious monopoly rents are earned by the industry. And Fourie and Smith’s analysis of performance is shown to be confused and erroneous. Section 5 is a summary and conclusion. Bibliogr., notes, ref.
