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Experimental Tests of Consciously Parallel Behaviour in Oligopoly

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Author Info

  • Ronald Harstad

    (Rutgers University)

  • Stephen Martin

    (Institute of Economics, University of Copenhagen)

  • Hans-Theo Normann

    (Humboldt Universität zu Berlin)

Abstract

The purpose of this research is to examine, in experimental oligopoly markets, (a) whether parallel pricing patterns emerge when communication among players is limited to cheap talk announcements; (b) whether such pricing patterns, if they emerge, lead to payoffs that exceed those players would receive in Nash equilibrium of the one-shot game. Results indicate that announcements and price matching lead to margins that exceed those of static Nash equilibrium, while falling short of joint profit maximization.

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File URL: http://www.econ.ku.dk/cie/dp/dp_1997-1999/1997-07.pdf/
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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 1997-07.

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Length: 37 pages
Date of creation: Mar 1997
Date of revision:
Publication status: Published in: Louis Phlips (ed.): Applied Industrial Economics, Cambridge University Press, 1998, 123-151
Handle: RePEc:kud:kuieci:1997-07

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References

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  1. Harrington, Joseph E, Jr, 1987. "Collusion in Multiproduct Oligopoly Games under a Finite Horizon," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 1-14, February.
  2. Cason, Timothy N., 1995. "Cheap talk price signaling in laboratory markets," Information Economics and Policy, Elsevier, vol. 7(2), pages 183-204, June.
  3. Maura P. Doyle & Christopher M. Snyder, 1999. "Information Sharing and Competition in the Motor Vehicle Industry," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1326-1364, December.
  4. Grether, David M. & Plott, Charles R., . "The Effects of Market Practices in Oligopolistic Markets: An Experimental Examination of the Ethyl Case," Working Papers 404, California Institute of Technology, Division of the Humanities and Social Sciences.
  5. Benson, Bruce L. & Faminow, M. D., 1988. "The impact of experience on prices and profits in experimental duopoly markets," Journal of Economic Behavior & Organization, Elsevier, vol. 9(4), pages 345-365, June.
  6. Stephen Martin, 1997. "Competition Policy: Publicity vs. Prohibition & Punishment," CIE Discussion Papers 1997-02, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  7. Mason, Charles F. & Phillips, Owen R. & Redington, Douglas B., 1991. "The role of gender in a non-cooperative game," Journal of Economic Behavior & Organization, Elsevier, vol. 15(2), pages 215-235, March.
  8. Abbink, Klaus & Abdolkarim Sadrieh, 1995. "RatImage - research Assistance Toolbox for Computer-Aided Human Behavior Experiments," Discussion Paper Serie B 325, University of Bonn, Germany.
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Citations

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Cited by:
  1. SUETENS, Sigrid, 2003. "Voluntary R&D cooperation in experimental duopoly markets," Working Papers 2003029, University of Antwerp, Faculty of Applied Economics.
  2. SUETENS, Sigrid, 2004. "Literature review: R&D cooperation in oligopoly with spillovers: An experimental economics approach," Working Papers 2004024, University of Antwerp, Faculty of Applied Economics.
  3. Kübler, D. & Müller, W., 2002. "Simultaneous and sequential price competition on heterogeneous duopoly markets: Experimental evidence," Open Access publications from Tilburg University urn:nbn:nl:ui:12-112518, Tilburg University.
  4. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2000. "Does information about competitors' actions increase or decrease competition in experimental oligopoly markets?," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 39-57, January.
  5. Normann, Hans-Theo, 2010. "Experimentelle Ökonomik für die Wettbewerbspolitik," DICE Ordnungspolitische Perspektiven 06, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  6. Steffen Huck & Hans-Theo Normann & Jörg Oechssler, 2001. "Two are Few and Four are Many: Number Effects in Experimental Oligopolies," Bonn Econ Discussion Papers bgse12_2001, University of Bonn, Germany.
  7. Garcia-Gallego, Aurora & Georgantzis, Nikolaos, 2001. "Multiproduct activity in an experimental differentiated oligopoly," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 493-518, March.

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