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Collusion in experimental Bertrand duopolies with convex costs: The role of cost asymmetry

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  • Argenton, Cédric
  • Müller, Wieland

Abstract

Theory, experimental studies, as well as antitrust guidelines suggest that symmetry among firms is conducive to more collusive outcomes. We test this perception in a series of experimental repeated Bertrand duopolies where firms have convex costs. We implement symmetric as well as asymmetric markets that vary in their degree of cost asymmetry among firms. We find no evidence of symmetric markets being more prone to collusion than asymmetric markets. If anything, asymmetry helps firms coordinate on higher prices and achieve higher profits.

Suggested Citation

  • Argenton, Cédric & Müller, Wieland, 2012. "Collusion in experimental Bertrand duopolies with convex costs: The role of cost asymmetry," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 508-517.
  • Handle: RePEc:eee:indorg:v:30:y:2012:i:6:p:508-517
    DOI: 10.1016/j.ijindorg.2012.05.006
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    Cited by:

    1. Harrington, Joseph E. & Hernan Gonzalez, Roberto & Kujal, Praveen, 2016. "The relative efficacy of price announcements and express communication for collusion: Experimental findings," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 251-264.
    2. Dijkstra, Peter T., 2014. "Price Leadership and Unequal Market Sharing," Research Report 14013-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    3. repec:dgr:rugsom:14010-eef is not listed on IDEAS
    4. Andersson, Ola & Argenton, Cédric & Weibull, Jörgen W., 2014. "Robustness to strategic uncertainty," Games and Economic Behavior, Elsevier, vol. 85(C), pages 272-288.
    5. repec:eee:jeborg:v:144:y:2017:i:c:p:121-132 is not listed on IDEAS
    6. repec:eee:matsoc:v:93:y:2018:i:c:p:123-131 is not listed on IDEAS
    7. Jacobs, Martin & Requate, Till, 2016. "Bertrand-Edgeworth markets with increasing marginal costs and voluntary trading: Experimental evidence," Economics Working Papers 2016-01, Christian-Albrechts-University of Kiel, Department of Economics.
    8. repec:bla:ecinqu:v:56:y:2018:i:4:p:1950-1979 is not listed on IDEAS
    9. Daniel Cracau & Abdolkarim Sadrieh, 2014. "The Divergent Effects of Long-Term and Short-Term Entry Investments on Home Market Cartels," FEMM Working Papers 140003, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    10. Roy, Nilanjan, 2017. "Action revision, information and collusion in an experimental duopoly market," MPRA Paper 77033, University Library of Munich, Germany.
    11. Kurschilgen, Michael & Morell, Alexander & Weisel, Ori, 2017. "Internal conflict, market uniformity, and transparency in price competition between teams," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 121-132.
    12. Dijkstra, Peter T. & Haan, Marco A. & Mulder, Machiel, 2017. "Industry structure and collusion with uniform yardstick competition: Theory and experiments," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 1-33.
    13. Jun Honda, 2015. "Games with the Total Bandwagon Property," Department of Economics Working Papers wuwp197, Vienna University of Economics and Business, Department of Economics.
    14. Swoboda, Sandra Maria, 2017. "Einfluss ausgewählter Determinanten auf die Kartellbildung und -stabilität: Eine Literaturstudie," Arbeitspapiere 176, University of Münster, Institute for Cooperatives.
    15. Dijkstra, Peter & Haan, Marco A. & Mulder, Machiel, 2014. "Industry structure and collusion with uniform yardstick competition," Research Report 14010-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    16. Dijkstra, Peter T., 2015. "Price leadership and unequal market sharing: Collusion in experimental markets," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 80-97.
    17. repec:gam:jgames:v:9:y:2018:i:3:p:45-:d:156766 is not listed on IDEAS
    18. Subhasish Dugar & Arnab Mitra, 2016. "Bertrand Competition With Asymmetric Marginal Costs," Economic Inquiry, Western Economic Association International, vol. 54(3), pages 1631-1647, July.
    19. Fischer, Christian & Normann, Hans-Theo, 2019. "Collusion and bargaining in asymmetric Cournot duopoly—An experiment," European Economic Review, Elsevier, vol. 111(C), pages 360-379.
    20. repec:eee:eneeco:v:66:y:2017:i:c:p:261-271 is not listed on IDEAS
    21. repec:spr:portec:v:18:y:2019:i:1:d:10.1007_s10258-018-0149-1 is not listed on IDEAS

    More about this item

    Keywords

    Bertrand competition; Convex costs; Collusion; Coordination; Experimental economics;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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