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Pre-play communication in Cournot competition: An experiment with students and managers

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  • Waichman, Israel
  • Requate, Till
  • Siang, Ch'ng Kean

Abstract

This study investigates the impact of pre-play communication on the outcomes in Cournot duopoly and triopoly experiments, using both students and managers as subjects. Communication is implemented by two different devices, a 'standardized-communication' and a free-communication device. We find that the effect of communication on collusion is larger in duopoly than in triopoly. Moreover, managers behave in a similar way under the two communication devices, while students are more influenced by the free-communication than by the standardized-communication device. In addition, managers select lower aggregate quantities than students, and communication enhances the difference between the subject pools in duopoly but reduces this difference in triopoly. Inspecting individual behavior, in all treatments the output adjustment is significantly correlated with the previous round's best response strategy. In the treatments with communication, the effect of imitation becomes larger and crowds out the effect of myopic best response. Finally, in all treatments duopoly results in more collusion than triopoly. --

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Bibliographic Info

Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2010,09.

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Date of creation: 2010
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Handle: RePEc:zbw:cauewp:201009

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Related research

Keywords: artefactual field experiment; subject pools; Cournot oligopoly; managers; cheap talk;

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Cited by:
  1. Fonseca, Miguel A. & Normann, Hans-Theo, 2012. "Explicit vs. tacit collusion: The impact of communication in oligopoly experiments," DICE Discussion Papers 65, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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