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Pure Numbers Effects, Market Power, and Tacit Collusion in Posted Offer Markets

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Author Info
Douglas D. Davis () (Department of Economics, VCU School of Business)

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Abstract

This paper reports an experiment conducted to distinguish the effects of seller concentration, static market power and dynamic incentives to cooperate on posted-offer market performance. Results indicate that a combination of static market power and dynamic incentives to cooperate organize most deviations from Walrasian predictions. Concentration exerts little independent effect. Further, despite a high correlation between dynamic incentives to cooperate and prices, sellers fail to recognizably coordinate their actions. Rather, unstructured price signaling and response activities appear to drive outcomes. Excess capacity, a factor that affects the costs of price signaling is highly correlated with observed prices.

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File URL: http://www.people.vcu.edu/~dddavis/working%20papers/Davis12_20_2007.pdf
File Format: application/pdf
File Function: Revised version, 2007
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Publisher Info
Paper provided by VCU School of Business, Department of Economics in its series Working Papers with number 0603.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 22 pages
Date of creation: Sep 2006
Date of revision: Dec 2007
Handle: RePEc:vcu:wpaper:0603

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Postal: Box 844000, Richmond, VA 23284-4000
Phone: 804/828-1717
Web page: http://www.bus.vcu.edu/economics/
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Related research
Keywords: experiments market concentration market power

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Find related papers by JEL classification:
C9 - Mathematical and Quantitative Methods - - Design of Experiments
D4 - Microeconomics - - Market Structure and Pricing
L4 - Industrial Organization - - Antitrust Issues and Policies

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:
  1. Ketcham, Jon & Smith, Vernon L & Williams, Arlington W, 1984. "A Comparison of Posted-Offer and Double-Auction Pricing Institutions," Review of Economic Studies, Blackwell Publishing, vol. 51(4), pages 595-614, October. [Downloadable!] (restricted)
  2. Durham, Yvonne & McCabe, Kevin & Olson, Mark A. & Rassenti, Stephen & Smith, Vernon, 2004. "Oligopoly competition in fixed cost environments," International Journal of Industrial Organization, Elsevier, vol. 22(2), pages 147-162, February. [Downloadable!] (restricted)
  3. Alger, Dan, 1987. "Laboratory Tests of Equilibrium Predictions with Disequilibrium Data," Review of Economic Studies, Blackwell Publishing, vol. 54(1), pages 105-45, January. [Downloadable!] (restricted)
  4. Douglas D. Davis & Bart J. Wilson, 2006. "Strategic Buyers, Horizontal Mergers and Synergies: An Experimental Investigation," Working Papers 0601, VCU School of Business, Department of Economics. [Downloadable!]
  5. Binmore, Ken, 1999. "Why Experiment in Economics?," Economic Journal, Royal Economic Society, vol. 109(453), pages F16-24, February. [Downloadable!] (restricted)
  6. Douglas D. Davis & Charles A. Holt, 1994. "Market Power and Mergers in Laboratory Markets with Posted Prices," RAND Journal of Economics, The RAND Corporation, vol. 25(3), pages 467-487, Autumn. [Downloadable!] (restricted)
  7. Douglas D. Davis & Oleg Korenok, 2005. "Posted - Offer Markets In Near Continuous Time: an Experimental Investigation," Working Papers 0504, VCU School of Business, Department of Economics, revised 2007. [Downloadable!]
Full references

Cited by:
(explanations, 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.)

  1. Douglas D. Davis & Korenok Oleg & Robert Reilly, 2007. "Re-matching, Information and Sequencing Effects in Posted Offer Markets," Working Papers 0701, VCU School of Business, Department of Economics, revised Oct 2007. [Downloadable!]
  2. Henrik Orzen, 2006. "Counterintuitive Number Effects in Experimental Oligopolies," Discussion Papers 2006-22, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
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