"Malaysian tin market fiasco"

Another example of an unsuccessful corner, in this story of the "Malaysian tin market fiasco,"

"[T]he people who got squeezed were the aspiring cornerers themselves. Those who had sold short futures contracts did indeed find it hard to locate tin to deliver as settlement day approached. This created a crisis on the LME, with traders facing the prospect of default and ruin. As the short squeeze loomed in February 1982, the LME changed its rules --- it declared that traders who failed to meet sales contracted could pay a fine --- 120 GBP/ton --- instead of supplying physical tin, meaning short sellers could avoid paying steep premium to the cornerers, which could have been >1000 GBP/ton. There was a collapse in tin prices following the ruling, culminating in massive losses for the Malaysian/Swiss partners. At the same time, tin supplies continued to come from the US stockpile while tin users began reducing stocks due to high prices and a continuing global recession."

Cornering a market is an attempt to create a runaway positive feedback loop that benefits you, but this never seems to work very well. Certainly not as well as a positive feedback loop from network effects, as in a software or operating system or telephone network.

It's generally better not to be too greedy, even if you think you have the ace in the hole or a "monopoly". This concept was important in thinking about K-V Pharma charging too much for Makena.

When your opponent is cornered they have a huge incentive to aggressively find a way out. Remember the story from our review of The Futures, about the Chicago futures exchanges?:

"In 1897, a trader named Joseph Leiter cornered the wheat market and trapped Philip Armour short. He offered to settle with Leiter for $4 million, but Leiter got greedy and refused. Armour broke the corner by bringing wheat to Chicago from Minnesota, using ice-breakers to keep the water open. Breaking the corner turned Leiter's paper winnings into a massive loss."

Another lesson is that exchanges aren't run for the benefit of people trying to corner the market.

Similarly, the rules regarding patents in the U.S. have been changed or undermined at times when it appeared that patent owners stood to make too much money.