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Price dynamics and collusion under short-run price commitments

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Author Info
Leufkens, Kasper
Peeters, Ronald (METEOR)

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Abstract

We consider a dynamic homogenous oligopoly in which firms set prices repeatedly. Theory predicts that short-run price commitments have an increasing impact on profits and may lead to less price stability. The experiments that we conduct provide support for the first effect and against the second effect when a random ending rule is applied. Application of a fixed ending rule seems to reverse these findings, but none of the effects is significant.

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Paper provided by Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization in its series Research Memoranda with number 052.

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Date of creation: 2008
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Handle: RePEc:dgr:umamet:2008052

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Keywords: microeconomics ;

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  2. Huck, Steffen & Muller, Wieland & Normann, Hans-Theo, 2002. "To Commit or Not to Commit: Endogenous Timing in Experimental Duopoly Markets," Games and Economic Behavior, Elsevier, vol. 38(2), pages 240-264, February. [Downloadable!] (restricted)
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  3. Cason, Timothy N., 1995. "Cheap talk price signaling in laboratory markets," Information Economics and Policy, Elsevier, vol. 7(2), pages 183-204, June. [Downloadable!] (restricted)
  4. MiguelA. Fonseca & Hans-Theo Normann, 2008. "Mergers, Asymmetries and Collusion: Experimental Evidence," Economic Journal, Royal Economic Society, vol. 118(527), pages 387-400, 03. [Downloadable!] (restricted)
  5. Cason, Timothy N. & Friedman, Daniel & Wagener, Florian, 2005. "The dynamics of price dispersion, or Edgeworth variations," Journal of Economic Dynamics and Control, Elsevier, vol. 29(4), pages 801-822, April. [Downloadable!] (restricted)
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  6. Selten,Reinhard & Mitzkewitz,Michael & Uhlich,Gerald, . "Duopoly strategies programmed by experienced players," Discussion Paper Serie B 106, University of Bonn, Germany.
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  7. Yoella Bereby-Meyer & Alvin E. Roth, 2006. "The Speed of Learning in Noisy Games: Partial Reinforcement and the Sustainability of Cooperation," American Economic Review, American Economic Association, vol. 96(4), pages 1029-1042, September. [Downloadable!]
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  9. Keser, Claudia, 2000. "Cooperation in symmetric duopolies with demand inertia," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 23-38, January. [Downloadable!] (restricted)
  10. Pedro Dal Bó, 2005. "Cooperation under the Shadow of the Future: Experimental Evidence from Infinitely Repeated Games," American Economic Review, American Economic Association, vol. 95(5), pages 1591-1604, December. [Downloadable!]
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  11. Ola Andersson & Erik Wengström, 2007. "Do Antitrust Laws Facilitate Collusion? Experimental Evidence on Costly Communication in Duopolies," Scandinavian Journal of Economics, Blackwell Publishing, vol. 109(2), pages 321-339, 06. [Downloadable!] (restricted)
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  12. Engle-Warnick, Jim & Slonim, Robert L., 2004. "The evolution of strategies in a repeated trust game," Journal of Economic Behavior & Organization, Elsevier, vol. 55(4), pages 553-573, December. [Downloadable!] (restricted)
  13. Isaac, R Mark & Smith, Vernon L, 1985. "In Search of Predatory Pricing," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 320-45, April. [Downloadable!] (restricted)
  14. Muller, Wieland, 2006. "Allowing for two production periods in the Cournot duopoly: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 60(1), pages 100-111, May. [Downloadable!] (restricted)
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  15. Dufwenberg, Martin & Gneezy, Uri, 2000. "Price competition and market concentration: an experimental study," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 7-22, January. [Downloadable!] (restricted)
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