Cornering the market

Companies that have cornered their markets have usually done so in an attempt to gain greater leeway in their decisions; for example, they may desire to charge higher prices for their products without fears of losing too much business. The cornerer hopes to gain control of enough of the supply of the commodity to be able to set the price for it.

Strategy and risks[edit]

Cornering a market can be attempted through several mechanisms. The most direct strategy is to buy a large percentage of the available commodity offered for sale in some spot market and hoard it. With the advent of futures trading, a cornerer may buy a large number of futures contracts on a commodity and then sell them at a profit after inflating the price.


Although there have been many attempts to corner markets by massive purchases in everything from tin to cattle, to date very few of these attempts have ever succeeded; instead, most of these attempted corners have tended to break themselves spontaneously. Indeed, as long ago as 1923, Edwin Lefèvre wrote, "very few of the great corners were profitable to the engineers of them."^[1]


A company attempting to corner a market is vulnerable due to the size of its position, which makes it highly susceptible to market risk. By its nature, cornering a market requires a company to purchase commodities or their derivatives at artificial prices; this effectively creates a situation where other investors attempt to profit off of these machinations through arbitrage. This has a chilling effect on the cornering attempt, since these investors usually take positions opposed to the cornerer. Furthermore, if the price starts to move against the cornerer, any attempt by the cornerer to sell would likely cause the price to drop substantially, subjecting the cornerer to catastrophic risk.


In nearly all cases, the company simply runs out of money and disbands before getting close to controlling prices. In the few cases where companies have purchased a dominant position in a market, governments and exchanges have intervened. Cornering a market is often considered unethical by the general public and has highly undesirable effects on the economy.^[2]