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Price dynamics and collusion under short-run price commitments

  • Leufkens, Kasper
  • Peeters, Ronald

We consider a dynamic homogeneous oligopoly in which firms set prices repeatedly. Theory predicts that short-run price commitments increase profits and may lead to less price stability. The experiments that we conducted provide support for the first effect and against the second effect when a random ending rule is applied. When a fixed ending rule is applied, we find no significant impact of short-run price commitments on profits and price stability.

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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 29 (2011)
Issue (Month): 1 (January)
Pages: 134-153

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Handle: RePEc:eee:indorg:v:29:y:2011:i:1:p:134-153
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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