Chapter 9 - Tacit Collusion

As I am not an insider at Nucor, I cannot with any level of certainty deem Nucor free of any type of tacit collusion activities, but I can make some observations based on its industry and business strategy.

First, within its market, Nucor uses a business strategy of price leadership.  Through technology, social ambiguity, experience and management, Nucor stays competitive based on price, as it can't use product differentiation to any kind of advantage.  The strategy of price leadership precludes Nucor from using tacit collusion if it wants to be more profitable than other firms based on its pricing strategy.

In reference to Nucor's industry, it does not abide by those characteristics that enable and foster tacit collusion.

Need Small # of Firms:  there are quite a number of steel mill firms, both integrated and mini-mill, both domestic and international.
Produce Homogeneity: there may be some of this, as there are only a certain amount of different products that are made of steel and used commercially.  This could lead to some tacit collusion.
Cost Homogeneity:  Nucor strives on being a price leader, so cost homogeneity is unlikely to exits in this industry.
Price Leader:  There does not appear to be a price leader that controls an exceptionally large portion of the steel industry.  In the early 1900's, US Steel would have fulfilled this position, but not in today's world.
Industry Social Structure:  There is no doubt a specific social structure within the steel industry, as many firms have evolved from one another or been created via mergers and breakups, but given the international flavor of the industry today, social structure is probably not leading to effective collusion.
High Order Frequency & Small Orders:  I believe that the steel industry produces all manner of order sizes and quantities.  There is also definite bidding for large contracts, which itself hurts attempts at tacit collusion.
Large Inventory & Order Backlogs:  The steel industry does keep inventory, though I don't know how accepting of backlogs that customers might be who order product on a continuous basis.  One of the tenants that mini-mill plants adhere to is lean processing, which by definition do not a promote large inventories.
Entry Barriers:  There are entry barriers to the steel industry, namely the cost of establishing plants and infrastructure; plus, the market for steel is to some degree, limited in its size.  That said, with the number of existing steel mills and mini-mills, entry is still possible.