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Price dynamics and collusion under short-run price commitments

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  • Leufkens, Kasper
  • Peeters, Ronald

Abstract

We consider a dynamic homogeneous oligopoly in which firms set prices repeatedly. Theory predicts that short-run price commitments increase profits and may lead to less price stability. The experiments that we conducted provide support for the first effect and against the second effect when a random ending rule is applied. When a fixed ending rule is applied, we find no significant impact of short-run price commitments on profits and price stability.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 29 (2011)
Issue (Month): 1 (January)
Pages: 134-153

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Handle: RePEc:eee:indorg:v:29:y:2011:i:1:p:134-153

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Web page: http://www.elsevier.com/locate/inca/505551

Related research

Keywords: Short-run price commitments Alternating-move games Collusion Price dynamics Experiment;

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Cited by:
  1. Lisa Bruttel & Urs Fischbacher, 2010. "Taking the initiative. What characterizes leaders?," TWI Research Paper Series 61, Thurgauer Wirtschaftsinstitut, Universität Konstanz.

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