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The effects of industry structure and yardstick design on strategic behavior with yardstick competition: an experimental study

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  • Haan, Marco A.
  • Dijkstra, Peter T.
  • Mulder, Machiel

    (Groningen University)

Abstract

We present an experiment on yardstick competition. Experimental firms set cost levels in each period and can communicate with each other in an attempt to increase the regulated price. We find that when market shares are heterogeneous, collusion is least frequent and prices are lowest. The number of players on a market also infuences prices, but to a lesser extent. Comparing across yardsticks, the discriminatory yardstick yields the lowest prices, while a best-practice yardstick yields the highest prices.

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File URL: http://irs.ub.rug.nl/ppn/363328874
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Bibliographic Info

Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 13008-EEF.

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Date of creation: 2013
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Handle: RePEc:dgr:rugsom:13008-eef

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  1. Potters, Jan & Rockenbach, Bettina & Sadrieh, Abdolkarim & van Damme, Eric, 2004. "Collusion under yardstick competition: an experimental study," International Journal of Industrial Organization, Elsevier, vol. 22(7), pages 1017-1038, September.
  2. Andrei Shleifer, 1985. "A Theory of Yardstick Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 319-327, Autumn.
  3. Martin Cave & Keiko Hatta, 2009. "Transforming telecommunications technologies--policy and regulation," Oxford Review of Economic Policy, Oxford University Press, vol. 25(3), pages 488-505, Autumn.
  4. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  5. Maria Bigoni & Sven-Olof Fridolfsson & ChloƩ Le Coq & Giancarlo Spagnolo, 2012. "fines, leniency, and rewards in antitrust," RAND Journal of Economics, RAND Corporation, vol. 43(2), pages 368-390, 06.
  6. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  7. W. Kip Viscusi & Joseph E. Harrington & John M. Vernon, 2005. "Economics of Regulation and Antitrust, 4th Edition," MIT Press Books, The MIT Press, edition 4, volume 1, number 026222075x, January.
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