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Collusion through price ceilings? In search of a focal-point effect

  • Engelmann, Dirk
  • Müller, Wieland

Abstract We resume the search for a collusive focal-point effect of price ceilings in laboratory markets. We argue that market conditions in previous studies were unfavorable for collusion which may have been responsible for not finding such a focal-point effect. Our design aims at maximizing the likelihood of a focal-point effect. Nevertheless, our results again fail to support the focal-point hypothesis. Collusion is as unlikely in markets with a price ceiling as in markets with unconstrained pricing. Overall, static Nash equilibrium predicts the data fairly accurately. We argue this might warrant re-interpretation of field studies on anti-competitive effects of price ceilings.

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

Volume (Year): 79 (2011)
Issue (Month): 3 (August)
Pages: 291-302

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Handle: RePEc:eee:jeborg:v:79:y:2011:i:3:p:291-302
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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