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Institutional Authority and Collusion

Author

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  • Axel Sonntag

    (University of East Anglia)

  • Daniel John Zizzo

    (University of East Anglia)

Abstract

A `collusion puzzle' exists by which, even though increasing the number of firms reduces the ability to tacitly collude, and leads to a collapse in collusion in experimental markets with four or more firms, in natural markets there are such numbers of firms colluding successfully. We present an experiment showing that, if managers are deferential towards an authority, firms can induce more collusion by delegating production decisions to middle managers and providing suitable informal nudges. This holds not only with two but also with four firms. We are also able to distinguish compliance effects from coordination effects from the nudges.

Suggested Citation

  • Axel Sonntag & Daniel John Zizzo, 2014. "Institutional Authority and Collusion," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 14-02, School of Economics, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:wcbess:14-02
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    Cited by:

    1. Vittorio Pelligra & Tommaso Reggiani & Daniel John Zizzo, 2020. "Responding to (un)reasonable requests by an authority," Theory and Decision, Springer, vol. 89(3), pages 287-311, October.
    2. Björn Vollan & Karla Henning & Deniza Staewa, 2017. "Do campaigns featuring impact evaluations increase donations? Evidence from a survey experiment," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 9(4), pages 500-518, October.
    3. Pelligra, Vittorio & Reggiani, Tommaso G. & Zizzo, Daniel John, 2016. "Responding to (Un)Reasonable Requests," IZA Discussion Papers 10189, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    collusion; Cournot; oligopoly; authority; delegation; coordination;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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