Cartel formation and pricing: The effect of managerial decision-making rules
We experimentally investigate how the managerial decision-making process affects choices in a Bertrand pricing game with an opportunity to form non-binding cartels. To do so we compare the effects of three decision-making rules for the firm (decisions by CEOs, majority rule and consensus) to each other and to decisions in a benchmark consisting of single-individual firms. It has been argued elsewhere that groups behave more competitively than individuals. In this setting this predicts that for all three decision-making rules we should observe fewer cartels and lower prices. This is not what we find. For the formation of cartels, there are no differences across treatments. For prices asked, we find that first, cartels lead to higher prices in all treatments, despite the fact that they are non-binding. Second, the decision-making rules strongly affect the prices asked. One thing that stands out is that firms run by CEOs ask higher prices (i.e., defect less often from the cartel) than observed in the other treatments.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Gary Bornstein & Uri Gneezy, 2002. "Price Competition Between Teams," Experimental Economics, Springer;Economic Science Association, vol. 5(1), pages 29-38, June.
- Bryant, Peter G & Eckard, E Woodrow, Jr, 1991. "Price Fixing: The Probability of Getting Caught," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 531-536, August.
- Matthias Sutter & Martin G. Kocher & Sabine Strauss, 2009.
"Individuals and teams in auctions,"
Oxford Economic Papers,
Oxford University Press, vol. 61(2), pages 380-394, April.
- Ola Andersson & Erik Wengström, 2007.
"Do Antitrust Laws Facilitate Collusion? Experimental Evidence on Costly Communication in Duopolies,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 109(2), pages 321-339, 06.
- Andersson, Ola & Wengström, Erik, 2004. "Do Antitrust Laws Facilitate Collusion? Experimental Evidence on Costly Communication in Duopolies," Working Papers 2004:14, Lund University, Department of Economics, revised 13 Sep 2004.
- Jose Apesteguia & Martin Dufwenberg & Reinhard Selten, 2007.
"Blowing the Whistle,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(1), pages 143-166, April.
- José Apesteguía & Martin Dufwenberg & Reinhard Selten, 2003. "Blowing the Whistle," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 0303, Departamento de Economía - Universidad Pública de Navarra, revised 2003.
- José Apesteguia & Martin Dufwenberg & Reinhard Selten, 2003. "Blowing the Whistle," Bonn Econ Discussion Papers bgse9_2003, University of Bonn, Germany.
- Apesteguia, Jose & Dufwenberg, Martin & Selten, Reinhard, 2003. "Blowing the Whistle," Research Papers in Economics 2003:5, Stockholm University, Department of Economics.
- Ann B. Gillette & Thomas H. Noe & Michael J. Rebello, 2000.
"Corporate board composition, protocols, and voting behavior: experimental evidence,"
FRB Atlanta Working Paper
2000-10, Federal Reserve Bank of Atlanta.
- Ann B. Gillette & Thomas H. Noe & Michael J. Rebello, 2003. "Corporate Board Composition, Protocols, and Voting Behavior: Experimental Evidence," Journal of Finance, American Finance Association, vol. 58(5), pages 1997-2032, October.
- Kugler, Tamar & Bornstein, Gary & Kocher, Martin G. & Sutter, Matthias, 2007.
"Trust between individuals and groups: Groups are less trusting than individuals but just as trustworthy,"
Munich Reprints in Economics
18202, University of Munich, Department of Economics.
- Kugler, Tamar & Bornstein, Gary & Kocher, Martin G. & Sutter, Matthias, 2007. "Trust between individuals and groups: Groups are less trusting than individuals but just as trustworthy," Journal of Economic Psychology, Elsevier, vol. 28(6), pages 646-657, December.
- Gary Bornstein & Matthias Sutter & Tamar Kugler & Martin G. Kocher, "undated". "Trust between individuals and groups: Groups are less rusting than individuals but just as trustworthy," Papers on Strategic Interaction 2005-02, Max Planck Institute of Economics, Strategic Interaction Group.
- Song, Fei, 2008. "Trust and reciprocity behavior and behavioral forecasts: Individuals versus group-representatives," Games and Economic Behavior, Elsevier, vol. 62(2), pages 675-696, March.
- Ann B. Gillette & Thomas H. Noe & Michael J. Rebello, "undated".
"Board structures around the world: An experimental investigation,"
Experimental Economics Center Working Paper Series
2007-04, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
- Ann B. Gillette & Thomas H. Noe & Michael J. Rebello, 2008. "Board Structures Around the World: an Experimental Investigation," Review of Finance, European Finance Association, vol. 12(1), pages 93-140.
- Ann B. Gillette & Thomas H. Noe & Michael J. Rebello, 2008. "Board structures around the world: An experimental investigation," OFRC Working Papers Series 2008fe15, Oxford Financial Research Centre.
- Kerr, Norbert L. & Niedermeier, Keith E. & Kaplan, Martin F., 1999. "Bias in Jurors vs Bias in Juries: New Evidence from the SDS Perspective, , , , , , , , ," Organizational Behavior and Human Decision Processes, Elsevier, vol. 80(1), pages 70-86, October.
- David J. Cooper & John H. Kagel, 2005. "Are Two Heads Better Than One? Team versus Individual Play in Signaling Games," American Economic Review, American Economic Association, vol. 95(3), pages 477-509, June.
- James Cox & Stephen Hayne, 2006.
"Barking up the right tree: Are small groups rational agents?,"
Springer;Economic Science Association, vol. 9(3), pages 209-222, September.
- James C. Cox & Stephen C. Hayne, "undated". "Barking Up the Right Tree: Are Small Groups Rational Agents?," Experimental Economics Center Working Paper Series 2006-02, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
- Cason, Timothy N., 1995. "Cheap talk price signaling in laboratory markets," Information Economics and Policy, Elsevier, vol. 7(2), pages 183-204, June.
- Robert, Christopher & Carnevale, Peter J., 1997. "Group Choice in Ultimatum Bargaining," Organizational Behavior and Human Decision Processes, Elsevier, vol. 72(2), pages 256-279, November.
- Blinder, Alan S & Morgan, John, 2005. "Are Two Heads Better than One? Monetary Policy by Committee," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(5), pages 789-811, October.
- Gillet, Joris & Schram, Arthur & Sonnemans, Joep, 2009. "The tragedy of the commons revisited: The importance of group decision-making," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 785-797, June.
- Jeroen Hinloopen & Adriaan R. Soetevent, 2008. "Laboratory evidence on the effectiveness of corporate leniency programs," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 607-616.
When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:29:y:2011:i:1:p:126-133. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.