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

Does collusive advertising facilitate collusive pricing? Evidence from experimental duopolies

Listed author(s):
  • Andreas Nicklisch

    ()

Registered author(s):

    This article analyzes experimentally whether the degree of collusion for one dimension of duopolists’ interactions influences the degree of collusion for another dimension. More precisely, I will explore whether a high degree of collusion for advertisement expenditures facilitates tacit price collusion. Two environments are tested, in which the size of the spillover between advertising expenditures is varied. The results indicate that both degrees of collusion are correlated: a high degree of collusion on advertising functions as a signalling device triggering a significantly higher degree of price collusion by the opponent. Thus advertising expenditures seem to be a useful indicator for market regulators to detect non-competitive pricing. Copyright Springer Science+Business Media, LLC 2012

    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://hdl.handle.net/10.1007/s10657-010-9180-0
    Download Restriction: Access to full text is restricted to subscribers.

    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 Springer in its journal European Journal of Law and Economics.

    Volume (Year): 34 (2012)
    Issue (Month): 3 (December)
    Pages: 515-532

    as
    in new window

    Handle: RePEc:kap:ejlwec:v:34:y:2012:i:3:p:515-532
    DOI: 10.1007/s10657-010-9180-0
    Contact details of provider: Web page: http://www.springer.com

    Order Information: Web: http://www.springer.com/journal/10657

    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. Morgan, John & Orzen, Henrik & Sefton, Martin, 2006. "An experimental study of price dispersion," Games and Economic Behavior, Elsevier, vol. 54(1), pages 134-158, January.
    2. Apesteguia, Jose & Huck, Steffen & Oechssler, Jorg, 2007. "Imitation--theory and experimental evidence," Journal of Economic Theory, Elsevier, vol. 136(1), pages 217-235, September.
    3. Theo Offerman & Jan Potters & Joep Sonnemans, 2002. "Imitation and Belief Learning in an Oligopoly Experiment," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 973-997.
    4. 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.
    5. Steven Salop & Joseph Stiglitz, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 493-510.
    6. Muren, Astri, 2000. "Quantity precommitment in an experimental oligopoly market," Journal of Economic Behavior & Organization, Elsevier, vol. 41(2), pages 147-157, February.
    7. Schmalensee, Richard, 1981. "Economies of Scale and Barriers to Entry," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1228-1238, December.
    8. Comanor, William S & Wilson, Thomas A, 1979. "The Effect of Advertising on Competition: A Survey," Journal of Economic Literature, American Economic Association, vol. 17(2), pages 453-476, June.
    9. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-659, September.
    10. 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.
    11. Schlag, Karl H., 1998. "Why Imitate, and If So, How?, : A Boundedly Rational Approach to Multi-armed Bandits," Journal of Economic Theory, Elsevier, vol. 78(1), pages 130-156, January.
    12. Bruno S. Frey & Stephan Meier, 2004. "Social Comparisons and Pro-social Behavior: Testing "Conditional Cooperation" in a Field Experiment," American Economic Review, American Economic Association, vol. 94(5), pages 1717-1722, December.
    13. Rosemarie Nagel & Nicolaas J. Vriend, 1999. "An experimental study of adaptive behavior in an oligopolistic market game," Journal of Evolutionary Economics, Springer, vol. 9(1), pages 27-65.
    14. Ganesh Iyer & Amit Pazgal, 2003. "Internet Shopping Agents: Virtual Co-Location and Competition," Marketing Science, INFORMS, vol. 22(1), pages 85-106, November.
    15. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June.
    16. Morgan, John & Orzen, Henrik & Sefton, Martin, 2006. "A laboratory study of advertising and price competition," European Economic Review, Elsevier, vol. 50(2), pages 323-347, February.
    17. 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.
    18. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
    19. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 1999. "Learning in Cournot Oligopoly--An Experiment," Economic Journal, Royal Economic Society, vol. 109(454), pages 80-95, March.
    20. Schmalensee, Richard, 1982. "Product Differentiation Advantages of Pioneering Brands," American Economic Review, American Economic Association, vol. 72(3), pages 349-365, June.
    21. Cason, Timothy N. & Datta, Shakun, 2006. "An experimental study of price dispersion in an optimal search model with advertising," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 639-665, May.
    22. 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.
    23. Steen, Frode & Sorgard, Lars, 1999. "Semicollusion in the Norwegian cement market," European Economic Review, Elsevier, vol. 43(9), pages 1775-1796, October.
    24. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
    25. Cubbin, John S, 1981. "Advertising and the Theory of Entry Barriers," Economica, London School of Economics and Political Science, vol. 48(191), pages 289-298, August.
    26. Chaim Fershtman & Eitan Muller, 1986. "Capital Investments and Price Agreements in Semicollusive Markets," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 214-226, Summer.
    27. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
    28. Kjell G. Salvanes & Frode Steen & Lars Sørgard, 2003. "Collude, Compete, or Both? Deregulation in the Norwegian Airline Industry," Journal of Transport Economics and Policy, University of Bath, vol. 37(3), pages 383-416, September.
    29. Ganesh Iyer & Amit Pazgal, 2003. "Erratum: Internet Shopping Agents: Virtual Co-Location and Competition," Marketing Science, INFORMS, vol. 22(2), pages 271-271, November.
    30. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
    31. Davis, Douglas D., 1999. "Advance production and Cournot outcomes: an experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 40(1), pages 59-79, September.
    32. 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.
    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:kap:ejlwec:v:34:y:2012:i:3:p:515-532. 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: (Sonal Shukla)

    or (Rebekah McClure)

    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.