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Cooperation without Coordination: Signaling, Types and Tacit Collusion in Laboratory Oligopolies

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  • Douglas D. Davis

    ()
    (Department of Economics, VCU School of Business)

  • Korenok Oleg

    ()
    (Department of Economics, VCU School of Business)

  • Robert Reilly

    ()
    (Department of Economics, VCU School of Business)

Abstract

We study the effects of price signaling activity and underlying propensities to cooperate on tacit collusion in posted offer markets. The primary experiment consists of an extensively repeated baseline sequence and a 'forecast' sequence that adds to the baseline a forecasting game that allows identification of signaling intentions. Forecast sequence results indicate that signaling intentions considerably exceed those that are counted under a standard signal measure based on previous period prices. Nevertheless, we find essentially no correlation between either measure of signal volumes and collusive efficiency. A second experiment demonstrates that underlying seller propensities to cooperate more clearly affect collusiveness.

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File URL: http://www.people.vcu.edu/~okorenok/DKR090109.pdf
File Function: Revised version, 2009
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Bibliographic Info

Paper provided by VCU School of Business, Department of Economics in its series Working Papers with number 0702.

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Length: 28 pages
Date of creation: Mar 2007
Date of revision: Sep 2009
Handle: RePEc:vcu:wpaper:0702

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Keywords: Experiments; Tacit Collusion; Price Signaling; Types;

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  1. Smith, Vernon L & Suchanek, Gerry L & Williams, Arlington W, 1988. "Bubbles, Crashes, and Endogenous Expectations in Experimental Spot Asset Markets," Econometrica, Econometric Society, vol. 56(5), pages 1119-51, September.
  2. Douglas D. Davis & Oleg Korenok, 2009. "Posted Offer Markets In Near-Continuous Time: An Experimental Investigation," Economic Inquiry, Western Economic Association International, vol. 47(3), pages 449-466, 07.
  3. Anna Gunnthorsdottir & Daniel Houser & Kevin McCabe & Holly Ameden, 2004. "Disposition, History and Contributions in Public Goods Experiments," Experimental 0401001, EconWPA.
  4. 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.
  5. Roberto Burlando & Francesco Guala, 2005. "Heterogeneous Agents in Public Goods Experiments," Experimental Economics, Springer, vol. 8(1), pages 35-54, April.
  6. Nathaniel T. Wilcox & Nick Feltovich, 2000. "Thinking Like a Game Theorist: Comment," Development Research Unit Working Paper Series archive-30, Monash University, Department of Economics.
  7. Croson, Rachel T. A., 2000. "Thinking like a game theorist: factors affecting the frequency of equilibrium play," Journal of Economic Behavior & Organization, Elsevier, vol. 41(3), pages 299-314, March.
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