Chapter 3
Competition and cooperation in oligopoly markets
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Case study synthetic rubber cartels
The history of synthetic rubber
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The first rubber tyres were produced in 1791. Around 1820
Thomas Hancock invented the ‘pickling machine’, that
masticated rubber and turned it into a warm, homogenous mass.
The big breakthrough in the use of rubber for tyres came in 1839
when Charles Goodyear invented vulcanised rubber.
The history of synthetic rubber (2)
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The demand for rubber increased rapidly. During the 19th
century Brazil held the monopoly on natural rubber.
However, with the legal export of seeds of the rubber tree
(Hevea brasiliensis) to England, later to Ceylon (Sri Lanka) and
Malacca, the production of natural rubber in South East Asia
soon exceeded the Brazilian production.
The history of synthetic rubber (3)
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Synthetic rubber was already invented around 1910 but it
took until WWII before it was produced on a larger scale.
The supply of natural rubber from South East Asia was halted
due to the Japanese occupation of South East Asia.
The history of synthetic rubber (4)
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Japan had been feeding their war machine since 1931 (Japanese
occupation of South East Asia) and desperately needed rubber.
The plan was simple: send an army and occupy all rubber
plantations. The Japanese attack on Pearl Harbour (7 December
1941) cut off nearly all of the US sources of natural rubber, the
only natural resource the US does not have. A day later the
Malayan peninsula was invaded, securing Japanese access to vast
rubber reserves and more enemies than it could cope with.
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The history of synthetic rubber (5)
After WWII, the production and supply of natural rubber
was quickly restored. Due to the increasing price and
demand, by the 1960s the production of synthetic rubber
soon surpassed that of natural rubber. The demand for rubber
increased even further; in the 1970s following the strong
growth in the car industry and in the 1980s due to the
increasing demand for condoms as a result of the worldwide
AIDS epidemic (most condoms contain natural rubber).
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Types of synthetic rubber
Styrene Butadiene Rubber (SBR) and Butadiene Rubber (BR)
are the most widely consumed types of synthetic rubbers.
Butadiene rubber is fully substitutable by natural rubber
(NR) regarding its use in tyres. Emulsion Styrene Butadiene
Rubber (ESBR) and BR are both used for tyres, whereas
Solution Styrene Butadiene Rubber (SSBR) is used for asphalt
applications.
Synthetic rubber applications
Figure 1 : global SBR applications
Based on a presentation during Rubber Summit, Ontario, 2008
Global SBR applications
mechanical goods
15%
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automotive parts
5%
others
4%
tyres
76%
Figure 2 : Global PBR applications
Based on a presentation during Rubber Summit, Ontario, 2008
Global PBR applications
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impact modifier
25%
others
4%
tyres
70%
golf balls
1%
Figure 3 : World tyre production
Based on a presentation during Rubber Summit, Ontario, 2008
World Tyre production
global production in
million units/year
2000
1800
1600
1400
1200
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1000
800
600
400
200
0
2007
USA
2008
Western Europe
2009
CIS
2010
Japan
2011
South Korea
2012
China