Risk Aversion and Tacit Collusion in a Bertrand Duopoly Experiment
AbstractWe investigate the relationship between collusive behavior in Bertrand oligopoly experiments and subject heterogeneity in risk preferences. We find that risk aversion is positively associated with tacit collusion when the goods are complements, but find no evidence of collusive behavior when the goods are substitutes. Furthermore, risk aversion is associated with lower prices with complement goods, but does not impact pricing behavior with substitute goods. In both treatments, we find that subjects tend to follow the price change of the other seller. In the complements treatment, however, this tendency increases with the degree of risk aversion.
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Bibliographic InfoArticle provided by Springer in its journal Review of Industrial Organization.
Volume (Year): 40 (2012)
Issue (Month): 1 (February)
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Web page: http://www.springerlink.com/link.asp?id=100336
Bertrand duopoly; Collusion; Experiment; Risk aversion; C9; L1;
Other versions of this item:
- Lisa R. Anderson & Beth A. Freeborn & Jason P. Hulbert, 2009. "Risk Aversion and Tacit Collusion in a Bertrand Duopoly Experiment," Working Papers 84, Department of Economics, College of William and Mary.
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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