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Semi-collusive advertising and pricing in experimental duopolies

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Author Info
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.

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Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2008_25.

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Date of creation: Jun 2008
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Handle: RePEc:mpg:wpaper:2008_25

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Related research
Keywords: Advertising; duopoly competition; experimental economics; price collusion; semi-collusive markets;

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Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - 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 - - Marketing and Advertising - - - Advertising

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