Explicit vs. tacit collusion—The impact of communication in oligopoly experiments
AbstractWe explore the difference between explicit and tacit collusion by investigating the impact communication has in experimental markets. For Bertrand oligopolies with various numbers of firms, we compare pricing behavior with and without the possibility to communicate among firms. We find strong evidence that talking helps to obtain higher profits for any number of firms, however, the gain from communicating is non-monotonic in the number of firms, with medium-sized industries having the largest additional profit from talking. We also find that industries continue to collude successfully after communication is disabled. Communication supports firms in coordinating on collusive pricing schemes, and it is also used for conflict mediation.
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Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 56 (2012)
Issue (Month): 8 ()
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Web page: http://www.elsevier.com/locate/eer
Cartels; Collusion; Communication; Experiments; Repeated games;
Other versions of this item:
- Fonseca, Miguel A. & Normann, Hans-Theo, 2012. "Explicit vs. tacit collusion: The impact of communication in oligopoly experiments," DICE Discussion Papers 65, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- L4 - Industrial Organization - - Antitrust Issues and Policies
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
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