IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Do buyer groups facilitate collusion?

Listed author(s):
  • Normann, Hans-Theo
  • Rösch, Jürgen
  • Schultz, Luis Manuel
Registered author(s):

    We explore whether lawful cooperation in buyer groups facilitates collusion in the product market. Buyer groups purchase inputs more economically. In a repeated game, abandoning the buyer group altogether or excluding single firms constitute credible threats. Hence, in theory, buyer groups facilitate collusion. We run several experimental treatments using three-firm Cournot markets to test these predictions and other effects like how buyer groups affect outcomes when group members can communicate. The experimental results show that buyer groups lead to lower outputs when groups can exclude single firms. Communication is often abused for explicit agreements and this strongly reduces competition.

    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.

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268114002832
    Download Restriction: Full text for ScienceDirect subscribers only

    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.

    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 109 (2015)
    Issue (Month): C ()
    Pages: 72-84

    as
    in new window

    Handle: RePEc:eee:jeborg:v:109:y:2015:i:c:p:72-84
    DOI: 10.1016/j.jebo.2014.11.004
    Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

    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.:

    as
    in new window


    1. Till Requate & Israel Waichman, 2011. "“A profit table or a profit calculator?” A note on the design of Cournot oligopoly experiments," Experimental Economics, Springer;Economic Science Association, vol. 14(1), pages 36-46, March.
    2. Vital Anderhub & Werner Güth & Ulrich Kamecke & Hans-Theo Normann, 2003. "Capacity Choices and Price Competition in Experimental Markets," Experimental Economics, Springer;Economic Science Association, vol. 6(1), pages 27-52, June.
    3. Charness, Gary & Dufwenberg, Martin, 2003. "Promises & Partnership," Research Papers in Economics 2003:3, Stockholm University, Department of Economics.
    4. Jeannette Brosig & Joachim Weimann & Axel Ockenfels, 2003. "The Effect of Communication Media on Cooperation," German Economic Review, Verein für Socialpolitik, vol. 4(2), pages 217-241, 05.
    5. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    6. Jose Apesteguia & Martin Dufwenberg & Reinhard Selten, 2007. "Blowing the Whistle," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(1), pages 143-166, April.
    7. Jan Potters & Sigrid Suetens, 2013. "Oligopoly Experiments In The Current Millennium," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 439-460, 07.
    8. Daniel Balliet, 2010. "Communication and Cooperation in Social Dilemmas: A Meta-Analytic Review," Journal of Conflict Resolution, Peace Science Society (International), vol. 54(1), pages 39-57, February.
    9. Martin, Stephen, 1996. "R & D joint ventures and tacit product market collusion," European Journal of Political Economy, Elsevier, vol. 11(4), pages 733-741, April.
    10. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
    11. Matthias Cinyabuguma & Talbot Page & Louis Putterman, 2006. "Can second-order punishment deter perverse punishment?," Experimental Economics, Springer;Economic Science Association, vol. 9(3), pages 265-279, September.
    12. Hans-Theo Normann, 2001. "Exchange Agreements Facilitate Collusion," German Economic Review, Verein für Socialpolitik, vol. 2(2), pages 113-125, 05.
    13. Hans-Theo Normann & Bradley J. Ruffle & Christopher M. Snyder, 2007. "Do buyer-size discounts depend on the curvature of the surplus function? Experimental tests of bargaining models," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 747-767, 09.
    14. repec:cup:apsrev:v:86:y:1992:i:02:p:404-417_08 is not listed on IDEAS
    15. Crawford, Vincent, 1998. "A Survey of Experiments on Communication via Cheap Talk," Journal of Economic Theory, Elsevier, vol. 78(2), pages 286-298, February.
    16. Isaac, R Mark & Walker, James M, 1988. "Communication and Free-Riding Behavior: The Voluntary Contribution Mechanism," Economic Inquiry, Western Economic Association International, vol. 26(4), pages 585-608, October.
    17. Gary Charness & Martin Dufwenberg, 2006. "Promises and Partnership," Econometrica, Econometric Society, vol. 74(6), pages 1579-1601, November.
    18. Suetens, Sigrid, 2008. "Does R&D cooperation facilitate price collusion? An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 66(3-4), pages 822-836, June.
    19. Fonseca, Miguel A. & Normann, Hans-Theo, 2014. "Endogenous cartel formation: Experimental evidence," Economics Letters, Elsevier, vol. 125(2), pages 223-225.
    20. Maria Bigoni & Sven-Olof Fridolfsson & Chloé Le Coq & Giancarlo Spagnolo, 2012. "fines, leniency, and rewards in antitrust," RAND Journal of Economics, RAND Corporation, vol. 43(2), pages 368-390, 06.
    21. 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.
    22. Christian Schultz, 2002. "Export Cartels and Domestic Markets," Journal of Industry, Competition and Trade, Springer, vol. 2(3), pages 233-246, September.
    23. Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September.
    24. Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
    25. Isaac, R. Mark & Ramey, Valerie & Williams, Arlington W., 1984. "The effects of market organization on conspiracies in restraint of trade," Journal of Economic Behavior & Organization, Elsevier, vol. 5(2), pages 191-222, June.
    26. Christopher M. Snyder, 1996. "A Dynamic Theory of Countervailing Power," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 747-769, Winter.
    27. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2004. "Two are few and four are many: number effects in experimental oligopolies," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 435-446, April.
    28. Waichman, Israel & Requate, Till & Siang, Ch’ng Kean, 2014. "Communication in Cournot competition: An experimental study," Journal of Economic Psychology, Elsevier, vol. 42(C), pages 1-16.
    29. Ben Greiner, 2004. "The Online Recruitment System ORSEE 2.0 - A Guide for the Organization of Experiments in Economics," Working Paper Series in Economics 10, University of Cologne, Department of Economics.
    30. Ben Greiner, 2004. "The Online Recruitment System ORSEE - A Guide for the Organization of Experiments in Economics," Papers on Strategic Interaction 2003-10, Max Planck Institute of Economics, Strategic Interaction Group.
    31. Bradley J. Ruffle, 2013. "When Do Large Buyers Pay Less? Experimental Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 61(1), pages 108-137, 03.
    32. Smith, Adam, 1776. "An Inquiry into the Nature and Causes of the Wealth of Nations," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1776.
    33. Cason, Timothy N., 1995. "Cheap talk price signaling in laboratory markets," Information Economics and Policy, Elsevier, vol. 7(2), pages 183-204, June.
    34. Fonseca, Miguel A. & Normann, Hans-Theo, 2012. "Explicit vs. tacit collusion—The impact of communication in oligopoly experiments," European Economic Review, Elsevier, vol. 56(8), pages 1759-1772.
    35. David J. Cooper & Kai-Uwe K?hn, 2014. "Communication, Renegotiation, and the Scope for Collusion," American Economic Journal: Microeconomics, American Economic Association, vol. 6(2), pages 247-278, May.
    36. Pedro Dal Bo & Guillaume R. Frochette, 2011. "The Evolution of Cooperation in Infinitely Repeated Games: Experimental Evidence," American Economic Review, American Economic Association, vol. 101(1), pages 411-429, February.
    37. Salvatore Piccolo & Jeanine Miklós-Thal, 2012. "Colluding through suppliers," RAND Journal of Economics, RAND Corporation, vol. 43(3), pages 492-513, 09.
    38. Thomas W. Ross, 2009. "Sustaining Cooperation with Joint Ventures," Journal of Law, Economics and Organization, Oxford University Press, vol. 25(1), pages 31-54, May.
    39. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    40. Andreas Nicklisch, 2012. "Does collusive advertising facilitate collusive pricing? Evidence from experimental duopolies," European Journal of Law and Economics, Springer, vol. 34(3), pages 515-532, December.
    41. Michelle S. Goeree & Eric Helland, 2009. "Do research joint ventures serve a collusive function?," IEW - Working Papers 448, Institute for Empirical Research in Economics - University of Zurich, revised Jul 2012.
    42. 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.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:109:y:2015:i:c:p:72-84. 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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.