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Collusion under Yardstick Competition: An Experimental Study

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  • Potters, J.J.M.
  • Rockenbach, B.
  • Sadrieh, A.
  • Damme, E.E.C. van

    (Tilburg University, Center for Economic Research)

Abstract

The effectiveness of relative performance evaluation schemes, such as yardstick competition, can be undermined by collusion.The degree to which the regulated agents manage to collude will be affected by the particulars of the scheme.We hypothesize that in a repeated game setting schemes will be more prone to collusion the smaller are the rents to the agents in case they behave non-cooperatively.We illustrate the relevance of this hypothesis by means of an economic experiment in which we compare the efficiency of two performance evaluation schemes.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2003-97.

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Date of creation: 2003
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Handle: RePEc:dgr:kubcen:200397

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Keywords: performance evaluation; competition; efficiency; games; collusion; yardstick;

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References

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  1. Tangeras, T.P., 1999. "Collusion-Proof Yardstick Competition," Papers 674, Stockholm - International Economic Studies.
  2. Jean-Jacques Laffont & David Martimort, 1997. "Collusion under Asymmetric Information," Econometrica, Econometric Society, vol. 65(4), pages 875-912, July.
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Citations

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Cited by:
  1. SUETENS, Sigrid & POTTERS, Jan, 2005. "Bertrand colludes more than Cournot," Working Papers 2005037, University of Antwerp, Faculty of Applied Economics.
  2. Fumitoshi Mizutani & Hideo Kozumi & Noriaki Matsushima, 2009. "Does yardstick regulation really work? Empirical evidence from Japan’s rail industry," Journal of Regulatory Economics, Springer, vol. 36(3), pages 308-323, December.
  3. Frisell, Lars & Roszbach, Kasper F. & Spagnolo, Giancarlo, 2008. "Governing the Governors: A Clinical Study of Central Banks," CEPR Discussion Papers 6888, C.E.P.R. Discussion Papers.
  4. Daniel Cracau & Benjamin Franz, 2014. "An experimental test of the mixed strategy equilibrium in price-quantity oligopolies," Economics Bulletin, AccessEcon, vol. 34(3), pages 1369-1380.
  5. Roberta Longo & Marisa Miraldo & Andrew Street, 2008. "Price regulation of pluralistic markets subject to provider collusion," Working Papers 045cherp, Centre for Health Economics, University of York.
  6. Ayako Suzuki, 2012. "Yardstick Competition to Elicit Private Information: An Empirical Analysis," Review of Industrial Organization, Springer, vol. 40(4), pages 313-338, June.
  7. Viceisza, Angelino, 2008. "An experimental inquiry into the effect of yardstick competition on corruption:," IFPRI discussion papers 774, International Food Policy Research Institute (IFPRI).
  8. Georg Meran & Christian von Hirschhausen, 2006. "A Modified Yardstick Competition Mechanism," Discussion Papers of DIW Berlin 559, DIW Berlin, German Institute for Economic Research.
  9. Daniel Cracau & Abdolkarim Sadrieh, 2014. "The Divergent Effects of Long-Term and Short-Term Entry Investments on Home Market Cartels," FEMM Working Papers 140003, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  10. Mulder, Machiel & Haan, Marco A. & Dijkstra, Peter T., 2014. "Industry structure and collusion with uniform yardstick competition: theory and experiments," Research Report 14010-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  11. Haan, Marco A. & Dijkstra, Peter T. & Mulder, Machiel, 2013. "The effects of industry structure and yardstick design on strategic behavior with yardstick competition: an experimental study," Research Report 13008-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  12. Daniel Cracau & Benjamin Franz, 2012. "An experimental study of mixed strategy equilibria in simultaneous price-quantity games," FEMM Working Papers 120017, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  13. Ayako Suzuki, 2008. "Yardstick Competition to Elicit Private Information: An Empirical Analysis of the Japanese Gas Distribution Industry," ISER Discussion Paper 0709, Institute of Social and Economic Research, Osaka University.

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