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Conspiracies and Secret Discounts in Laboratory Markets

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  • Davis, Douglas D
  • Holt, Charles A

Abstract

This paper uses laboratory methods to evaluate whether price-fixing conspiracies break down in the presence of opportunities to offer secret discounts. The primary treatment difference is whether or not buyer-specific discounts from the posted list price are permitted. In standard posted-offer markets, conspiring sellers almost uniformly find and maintain near-monopoly prices. But when the possibility of offering secret discounts is introduced, sellers find sustaining collusive agreements much more difficult and transactions prices tend to fall toward competitive levels. Secret discounts yield competitive outcomes less consistently, however, when sellers are provided ex post information about sales quantities.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 108 (1998)
Issue (Month): 448 (May)
Pages: 736-56
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Handle: RePEc:ecj:econjl:v:108:y:1998:i:448:p:736-56

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Cited by:
  1. Adrian de Groot Ruiz & Theo Offerman & Sander Onderstal, 2011. "An Experimental Study of Credible Deviations and ACDC," Tinbergen Institute Discussion Papers 11-153/1, Tinbergen Institute.
  2. John A. List, 2009. "The Economics of Open Air Markets," NBER Working Papers 15420, National Bureau of Economic Research, Inc.
  3. Arthur Zillante, 2005. "Spaced Out Monopolies: Theory and Empirics of Alternating Product Releases," Industrial Organization 0505008, EconWPA.
  4. Nihashi, M. & Saijo, T. & Une, M., 2000. "The Outsider and Sunk Cost Effects on 'Dango' in Public Procurement Bidding: An Experimental Analysis," ISER Discussion Paper 0514, Institute of Social and Economic Research, Osaka University.
  5. Christine Harbring, 2006. "The effect of communication in incentive systems-an experimental study," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(5), pages 333-353.

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