The Theory and Measurement of OPEC Stability

The theory of cartel behavior admits the possibility of either stability or disintegration and provides some guidance in seeking empirical measures of stability. Every cartel must devise some basis for limiting total output and sharing the limited total among participants. Sacrifice ratios provide a framework for appraising the stability of the Organization of Petroleum Exporting Countries (OPEC) to see if it is gaining or losing strength. It appears that OPEC is becoming more cohesive with respect to production shares, capacity, and reserves. The author says the split-level price increase of 1976 was divisive at the time, but has led to greater stability within the ranks of OPEC. He feels that the future of OPEC now appears more secure than at any time since its inception. 18 references, 3 figures, 2 tables.