Collusion Among Many Firms: The Disciplinary Power of Targeted Punishment
AbstractWe explore targeted punishment as an explanation for collusion among many firms. In a series of Cournot oligopoly experiments with various numbers of firms, we compare production decisions with and without the possibility to target punishment at specific market participants. We find strong evidence that targeted punishment enables firms to establish and maintain collusion. More so, we find that the collusive effect of targeted punishment is even stronger in markets with more competitors, suggesting a reversal of the conventional wisdom that collusion is easier the fewer the firms.
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Bibliographic InfoPaper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 13.02.
Length: 20 pages + appendix (total 25 pages)
Date of creation: Feb 2013
Date of revision:
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Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
More information through EDIRC
Cournot oligopoly; Experiments; Collusion; Targeted punishment;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-09 (All new papers)
- NEP-BEC-2013-03-09 (Business Economics)
- NEP-CDM-2013-03-09 (Collective Decision-Making)
- NEP-COM-2013-03-09 (Industrial Competition)
- NEP-EXP-2013-03-09 (Experimental Economics)
- NEP-IND-2013-03-09 (Industrial Organization)
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