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The relative efficacy of price announcements and express communication for collusion: Experimental findings

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  • Harrington, Joseph E.
  • Hernan Gonzalez, Roberto
  • Kujal, Praveen

Abstract

This study conducts experiments to determine the modes of communication that are able to produce and sustain collusion and how the efficacy of communication depends on market structure. Two communication treatments are considered: non-binding price announcements and unrestricted written communication. We find that price announcements are conducive to coordinating on a high price but only under duopoly and when firms are symmetric. The standard experimental finding that collusion without communication is rare when there are more than two firms is shown to be robust to allowing firms to make price announcements. When firms are asymmetric, price announcements do result in higher prices but there is little evidence that firms are coordinating their behavior. When firms are allowed to engage in unrestricted written communication, coordination on high prices occurs for all market structures. We find that the incremental value to express communication (compared to price announcements) is greater when firms are asymmetric and there are more firms.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:jeborg:v:128:y:2016:i:c:p:251-264
    DOI: 10.1016/j.jebo.2016.05.014
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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. Maria Bigoni & Sven-Olof Fridolfsson & Chloé Le Coq & Giancarlo Spagnolo, 2015. "Trust, Leniency, and Deterrence," Journal of Law, Economics, and Organization, Oxford University Press, vol. 31(4), pages 663-689.
    3. Boshoff, Willem & Frübing, Stefan & Hüschelrath, Kai, 2015. "Information exchange through non-binding advance price announcements: An antitrust analysis," ZEW Discussion Papers 15-060, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Möllers, Claudia & Stühmeier, Torben & Wenzel, Tobias, 2016. "Search costs in concentrated markets: An experimental analysis," DICE Discussion Papers 233, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. Fonseca, Miguel A. & Li, Yan & Normann, Hans-Theo, 2018. "Why factors facilitating collusion may not predict cartel occurrence: Experimental evidence," DICE Discussion Papers 289, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    6. Chen, Gang & Rytter, Niels G.M. & Jiang, Liping & Nielsen, Peter & Jensen, Lars, 2017. "Pre-announcements of price increase intentions in liner shipping spot markets," Transportation Research Part A: Policy and Practice, Elsevier, vol. 95(C), pages 109-125.

    More about this item

    Keywords

    Collusion; Price announcements; Experiments;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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