Testing Forbearance Experimentally - Duopolistic Competition of Conglomerate Firms
AbstractLike Feinberg and Sherman (1985) and Phillips and Mason (1992) we test experimentally whether conglomerate firms, i.e., firms competing on multiple structurally unrelated markets, can effectively limit competition. Our more general analysis assumes differentiated rather than homogeneous products and distinguishes strategic substitutes as well as complements to test this forbearance hypothesis. Rather than only a partners design we also explore a random strangers design to disentangle effects of forbearance and repeated interaction. Surprisingly, conglomerate firms do not limit competition, they rather foster it. More in line with our expectations we find more cooperation in complement markets than in substitute markets and also more cooperation in a partners than in a strangers matching.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2010-043.
Date of creation: 01 Jul 2010
Date of revision:
Experiment; Forbearance; Competition;
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-17 (All new papers)
- NEP-COM-2010-07-17 (Industrial Competition)
- NEP-EXP-2010-07-17 (Experimental Economics)
- NEP-MIC-2010-07-17 (Microeconomics)
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