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Price dynamics and collusion under short-run price commitments

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  • Leufkens, K.

    (Microeconomics & Public Economics)

  • Peeters, R.J.A.P.

    (Microeconomics & Public Economics)

Abstract

We consider a dynamic homogeneous oligopoly in which firms set prices repeatedly. Theory predicts that short-run price commitments increase profits and may lead to less price stability. The experiments that we conducted provide support for the first effect and against the second effect when a random ending rule is applied. When a fixed ending rule is applied, we find no significant impact of short-run price commitments on profits and price stability.
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Suggested Citation

  • Leufkens, K. & Peeters, R.J.A.P., 2008. "Price dynamics and collusion under short-run price commitments," Research Memorandum 052, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  • Handle: RePEc:unm:umamet:2008052
    DOI: 10.26481/umamet.2008052
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    Cited by:

    1. Gonzalo Ballestero, 2022. "Collusion and Artificial Intelligence: A Computational Experiment with Sequential Pricing Algorithms under Stochastic Costs," Working Papers 118, Red Nacional de Investigadores en Economía (RedNIE).
    2. Gonzalo Ballestero, 2021. "Collusion and Artificial Intelligence: A computational experiment with sequential pricing algorithms under stochastic costs," Young Researchers Working Papers 1, Universidad de San Andres, Departamento de Economia, revised Oct 2022.
    3. Emilio Calvano & Giacomo Calzolari & Vincenzo Denicolò & Sergio Pastorello, 2020. "Artificial Intelligence, Algorithmic Pricing, and Collusion," American Economic Review, American Economic Association, vol. 110(10), pages 3267-3297, October.
    4. Gonzalo Ballestero, 2021. "Collusion and Artificial Intelligence: A computational experiment with sequential pricing algorithms under stochastic costs," Asociación Argentina de Economía Política: Working Papers 4433, Asociación Argentina de Economía Política.
    5. Philippe Gillen & Alexander Rasch & Achim Wambach & Peter Werner, 2016. "Bid pooling in reverse multi-unit Dutch auctions: an experimental investigation," Theory and Decision, Springer, vol. 81(4), pages 511-534, November.
    6. Charalambos Christou, 2015. "A model of dynamic competition with sticky prices," Discussion Paper Series 2015_05, Department of Economics, University of Macedonia, revised Nov 2015.
    7. Jan Potters & Sigrid Suetens, 2013. "Oligopoly Experiments In The Current Millennium," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 439-460, July.
    8. Aghadadashli, Hamid, 2020. "Let’s Collude," CEPR Discussion Papers 15241, C.E.P.R. Discussion Papers.
    9. Bruttel, Lisa & Fischbacher, Urs, 2013. "Taking the initiative. What characterizes leaders?," European Economic Review, Elsevier, vol. 64(C), pages 147-168.
    10. Timo Klein, 2021. "Autonomous algorithmic collusion: Q‐learning under sequential pricing," RAND Journal of Economics, RAND Corporation, vol. 52(3), pages 538-558, September.

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