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Collusion under yardstick competition an experimental study

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Author Info
Potters, J.J.M.
Rockenbach, B.
Sadrieh, A.
Damme, E.E.C. van (Tilburg University, Center for Economic Research)

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

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

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Related research
Keywords: collusion; yardstick;

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Find related papers by JEL classification:
C9 - Mathematical and Quantitative Methods - - Design of Experiments
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  4. Reinhard Selten & Michael Mitzkewitz & Gerald R. Uhlich, 1997. "Duopoly Strategies Programmed by Experienced Players," Econometrica, Econometric Society, vol. 65(3), pages 517-556, May.
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  5. Abbink, Klaus & Abdolkarim Sadrieh, 1995. "RatImage - research Assistance Toolbox for Computer-Aided Human Behavior Experiments," Discussion Paper Serie B 325, University of Bonn, Germany.
  6. Jean-Jacques Laffont & David Martimort, 1998. "Collusion and Delegation," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 280-305, Summer. [Downloadable!] (restricted)
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  7. Andrei Shleifer, 1985. "A Theory of Yardstick Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 319-327, Autumn. [Downloadable!] (restricted)
  8. Keser, Claudia & van Winden, Frans, 2000. " Conditional Cooperation and Voluntary Contributions to Public Goods," Scandinavian Journal of Economics, Blackwell Publishing, vol. 102(1), pages 23-39, March. [Downloadable!] (restricted)
  9. Robert Gibbons & Kevin Murphy, 1989. "Relative Performance Evaluation for Chief Executive Officers," Working Papers 628, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
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  10. Dye, Ronald A, 1984. "The Trouble with Tournaments," Economic Inquiry, Oxford University Press, vol. 22(1), pages 147-49, January.
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  12. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 1999. "Learning in Cournot Oligopoly--An Experiment," Economic Journal, Royal Economic Society, vol. 109(454), pages C80-95, March. [Downloadable!] (restricted)
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  13. Robert Gibbons & Kevin J. Murphy, 1990. "Relative performance evaluation for chief executive officers," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 43(3), pages 30-51, February.
  14. Friedman, James W, 1971. "A Noncooperative View of Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 12(1), pages 106-22, February. [Downloadable!] (restricted)
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  15. Claudia Keser & Frans A.A.M. van Winden, 2000. "Conditional Cooperation and Voluntary Contributions to Public Goods," Tinbergen Institute Discussion Papers 00-011/1, Tinbergen Institute. [Downloadable!]
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  18. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn. [Downloadable!] (restricted)
  19. Croson, Rachel T. A., 1996. "Partners and strangers revisited," Economics Letters, Elsevier, vol. 53(1), pages 25-32, October. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
  2. 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. [Downloadable!]
  3. Angelino Viceisza, 2007. "An experimental inquiry into the effect of yardstick competition on corruption," Experimental Economics Center Working Paper Series 2007-09, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
    Other versions:
  4. 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. [Downloadable!] (restricted)
    Other versions:
  5. Georg Meran & Christian von Hirschhausen, 2006. "A Modified Yardstick Competition Mechanism," Working Papers 2006-05, Center for Network Industries and Infrastructure (CNI). [Downloadable!]
    Other versions:
  6. Sigrid Suetens & Jan Potters, 2007. "Bertrand colludes more than Cournot," Experimental Economics, Springer, vol. 10(1), pages 71-77, March. [Downloadable!] (restricted)
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