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Risk Aversion and Tacit Collusion in a Bertrand Duopoly Experiment

  • Lisa Anderson

    ()

  • Beth Freeborn

    ()

  • Jason Hulbert

    ()

We investigate the relationship between collusive behavior in Bertrand oligopoly experiments and subject heterogeneity in risk preferences. We find that risk aversion is positively associated with tacit collusion when the goods are complements, but find no evidence of collusive behavior when the goods are substitutes. Furthermore, risk aversion is associated with lower prices with complement goods, but does not impact pricing behavior with substitute goods. In both treatments, we find that subjects tend to follow the price change of the other seller. In the complements treatment, however, this tendency increases with the degree of risk aversion.

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File URL: http://hdl.handle.net/10.1007/s11151-011-9330-8
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Article provided by Springer & The Industrial Organization Society in its journal Review of Industrial Organization.

Volume (Year): 40 (2012)
Issue (Month): 1 (February)
Pages: 37-50

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Handle: RePEc:kap:revind:v:40:y:2012:i:1:p:37-50
DOI: 10.1007/s11151-011-9330-8
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