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Either with us or against us: experimental evidence on partial cartels

Author

Listed:
  • Georg Clemens

    (Compass Lexecon)

  • Holger A. Rau

    (University of Göttingen)

Abstract

This paper analyzes the coordination challenge a partial cartel faces when payoff asymmetries between potential cartel insiders and potential cartel outsiders are large. We introduce two experimental treatments: a standard treatment where a complete cartel can be supported in a Nash equilibrium and a modified treatment where a complete cartel and a partial cartel can both be supported in a Nash equilibrium. To assess the role of communication both treatments are additionally run with a “chat option,” yielding four treatments in total. Our results show that subjects frequently reject the formation of partial cartels in the modified treatments. In all treatments with communication subjects are more likely to form complete cartels than partial cartels. The implications of these results are important for antitrust: payoff asymmetries between cartel members and outsiders may jeopardize the formation of partial cartels. Yet complete cartels may be formed instead, if institutional mechanisms with frequent communication are used to form cartels.

Suggested Citation

  • Georg Clemens & Holger A. Rau, 2022. "Either with us or against us: experimental evidence on partial cartels," Theory and Decision, Springer, vol. 93(2), pages 237-257, September.
    • Handle: RePEc:kap:theord:v:93:y:2022:i:2:d:10.1007_s11238-021-09842-z
    DOI: 10.1007/s11238-021-09842-z
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    2. Bovin, Andreas & Bos, Iwan, 2023. "Market Shares as Collusive Marker: Evidence from the European Truck Industry," Research Memorandum 011, Maastricht University, Graduate School of Business and Economics (GSBE).
    3. Ayse Gül Mermer & Sander Onderstal & Joep Sonnemans, "undated". "Can Communication Mitigate Strategic Delays in Investment Timing?," Tinbergen Institute Discussion Papers 23-033/I, Tinbergen Institute.

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    More about this item

    Keywords

    Communication; Coordination; Experiment; Partial cartels;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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