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Collusion among many firms: The disciplinary power of targeted punishment

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  • Roux, Catherine
  • Thöni, Christian

Abstract

We explore targeted punishment as an explanation for collusion among many firms. We run a series of Cournot oligopoly experiments with and without the possibility of targeting punishment at specific market participants. In markets with two, four, six, and eight firms, we analyze to what extent targeted punishment helps firms to restrict output. We find that targeted punishment leads to more collusion across all markets. Furthermore, beyond two firms, this collusive effect turns out to be even stronger in markets with more competitors, suggesting a reversal of the conventional wisdom that collusion is easier with fewer firms.

Suggested Citation

  • Roux, Catherine & Thöni, Christian, 2015. "Collusion among many firms: The disciplinary power of targeted punishment," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 83-93.
  • Handle: RePEc:eee:jeborg:v:116:y:2015:i:c:p:83-93
    DOI: 10.1016/j.jebo.2015.03.018
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    Cited by:

    1. Catherine Roux & Christian Thöni, 2015. "Do control questions influence behavior in experiments?," Experimental Economics, Springer;Economic Science Association, vol. 18(2), pages 185-194, June.
    2. Nicklisch, Andreas & Grechenig, Kristoffel & Thöni, Christian, 2016. "Information-sensitive Leviathans," Journal of Public Economics, Elsevier, vol. 144(C), pages 1-13.
    3. Roux, Catherine & Santos-Pinto, Luís & Thöni, Christian, 2016. "Home bias in multimarket Cournot games," European Economic Review, Elsevier, vol. 89(C), pages 361-371.

    More about this item

    Keywords

    Cournot oligopoly; Experiments; Collusion; Targeted punishment;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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