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Price discrimination or uniform pricing: Which colludes more?

Author

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  • Horstmann, Niklas
  • Krämer, Jan

Abstract

Conventional wisdom attributes different economic outcomes of uniform pricing and price discrimination to the heterogeneity in market conditions or market participants, such as differences in demand elasticity or production costs. We offer a new explanation for the observed differences that relates to behavioral aspects rather than demand- or supply-side effects. In particular, in a symmetric Bertrand duopoly laboratory experiment, for which theory predicts no differences between the two pricing regimes, we find that tacit price collusion is systematically higher under price discrimination than under uniform pricing.

Suggested Citation

  • Horstmann, Niklas & Krämer, Jan, 2013. "Price discrimination or uniform pricing: Which colludes more?," Economics Letters, Elsevier, vol. 120(3), pages 379-383.
  • Handle: RePEc:eee:ecolet:v:120:y:2013:i:3:p:379-383
    DOI: 10.1016/j.econlet.2013.05.011
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    References listed on IDEAS

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    1. Farrell, Joseph & Maskin, Eric, 1989. "Renegotiation in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 327-360, December.
    2. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
    3. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
    4. Dobson, Paul W. & Waterson, Michael, 2008. "Chain-Store Competition: Customized vs. Uniform Pricing," Economic Research Papers 269789, University of Warwick - Department of Economics.
    5. Corwin D. Edwards, 1955. "Conglomerate Bigness as a Source of Power," NBER Chapters,in: Business Concentration and Price Policy, pages 331-359 National Bureau of Economic Research, Inc.
    6. Bruttel, Lisa V., 2009. "Group dynamics in experimental studies--The Bertrand Paradox revisited," Journal of Economic Behavior & Organization, Elsevier, vol. 69(1), pages 51-63, January.
    7. Harrington, Joseph E, Jr, 1987. "Collusion in Multiproduct Oligopoly Games under a Finite Horizon," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 1-14, February.
    8. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
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    Citations

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    Cited by:

    1. Krämer Jan & Vogelsang Ingo, 2016. "Co-Investments and Tacit Collusion in Regulated Network Industries: Experimental Evidence," Review of Network Economics, De Gruyter, vol. 15(1), pages 35-61, March.

    More about this item

    Keywords

    Price discrimination; Uniform pricing; Multimarket contact; Experimental economics; Collusion;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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