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Semi-collusive advertising and pricing in experimental duopolies

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  • Andreas Nicklisch

    (Max Planck Institute for Research on Collective Goods, Bonn)

Abstract

This article tests experimentally whether a high degree of collusion on advertisement expenditures facilitate tacit price collusion in duopoly markets. Two environments are tested, in which the size of the spillover between advertising expenditures is varied. The results show that the competitiveness of advertising and prices are significantly higher when the advertising spillover is higher than the price spillover than when advertising spillover is lower than the price spillover. In the second environment, a higher degree of advertising collusion leads for experienced players to a higher degree of price collusion. In the first environment, players behave at most semi-collusively, that is, if at all, they collude on advertising, but compete over prices.

Suggested Citation

  • Andreas Nicklisch, 2008. "Semi-collusive advertising and pricing in experimental duopolies," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2008_25, Max Planck Institute for Research on Collective Goods.
    • Handle: RePEc:mpg:wpaper:2008_25
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    More about this item

    Keywords

    Advertising; duopoly competition; experimental economics; price collusion; semi-collusive markets;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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