The Impact of Forward Trading on Tacit Collusion: Experimental Evidence
AbstractThis article reports the results of a laboratory experiment that examines the strategic effect of forward contracts on market power in infinitely repeated duopolies. Two competing effects motivate the experimental design. Allaz and Vila (1993) argue that forward markets act like additional competitors in that they increase quantity competition among firms. Conversely, Liski and Montero (2006) argue that forward contracting can facilitate collusive outcomes by enabling firms to soften competition. The experiment provides a first simultaneous test of these rival effects. Contrary to previous experimental studies, the results do not support the quantity-competition effect. Further, the findings provide evidence in support of the collusive hypothesis.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 43768.
Date of creation: 01 Jan 2013
Date of revision:
Cournot oligopoly; Collusion; Experiments; Forward markets; Electricity markets;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-19 (All new papers)
- NEP-BEC-2013-01-19 (Business Economics)
- NEP-COM-2013-01-19 (Industrial Competition)
- NEP-ENE-2013-01-19 (Energy Economics)
- NEP-EXP-2013-01-19 (Experimental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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