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

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  • Engelmann, Dirk
  • Müller, Wieland

Abstract

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.

Suggested Citation

  • Engelmann, Dirk & Müller, Wieland, 2011. "Collusion through price ceilings? In search of a focal-point effect," Journal of Economic Behavior & Organization, Elsevier, vol. 79(3), pages 291-302, August.
  • Handle: RePEc:eee:jeborg:v:79:y:2011:i:3:p:291-302
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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
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    Cited by:

    1. Rey, Patrick & Tirole, Jean, 2013. "Price Caps as Welfare-Enhancing Coopetition," TSE Working Papers 13-439, Toulouse School of Economics (TSE), revised Jan 2018.
    2. Rey, Patrick & Tirole, Jean, 2013. "Cooperation vs. Collusion: How Essentiality Shapes Co-opetition," IDEI Working Papers 801, Institut d'Économie Industrielle (IDEI), Toulouse.
    3. repec:spr:annopr:v:257:y:2017:i:1:d:10.1007_s10479-016-2218-0 is not listed on IDEAS
    4. Halevy, Yoram & Peters, Michael, 2007. "Other Regarding Preferences: Outcomes, Intentions, or Interdependence," Microeconomics.ca working papers peters-07-03-31-11-46-48, Vancouver School of Economics, revised 24 Jun 2009.
    5. Rudy Santore & Youping Li & Stephen Cotten, 2015. "Colluding with a conscience," Journal of Economics, Springer, vol. 114(3), pages 255-269, April.

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