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Testing Forbearance Experimentally - Duopolistic Competition of Conglomerate Firms

Author

Listed:
  • Werner Güth

    (Max Planck Institute of Economics, Strategic Interaction Group)

  • Kirsten Häger

    (Universität Jena)

  • Oliver Kirchkamp

    (School of Economics and Business Administration, Friedrich-Schiller-University Jena)

  • Joachim Schwalbach

    (Humboldt-Universität zu Berlin, Institute of Management)

Abstract

Like 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.

Suggested Citation

  • Werner Güth & Kirsten Häger & Oliver Kirchkamp & Joachim Schwalbach, 2010. "Testing Forbearance Experimentally - Duopolistic Competition of Conglomerate Firms," Jena Economics Research Papers 2010-043, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2010-043
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    References listed on IDEAS

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    Cited by:

    1. Jones, Matthew T., 2014. "Strategic complexity and cooperation: An experimental study," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 352-366.

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    More about this item

    Keywords

    Experiment; Forbearance; Competition;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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