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Institutional authority and collusion

Listed author(s):
  • Axel Sonntag

    ()

    (Centre for Behavioural and Experimental Social Science (CBESS) and School of Economics, University of East Anglia, Norwich NR4 7TJ, United Kingdom)

  • Daniel John Zizzo

    ()

    (Behavioural and Experimental Northeast Cluster (BENC), Newcastle University Business School, Newcastle University, Newcastle upon Tyne NE1 7RU, United Kingdom;)

A “collusion puzzle†exists by which, even though increasing the number of firms reduces the ability to tacitly collude, and leads to a collapse in collusion in experimental markets with three or more firms, in natural markets there are such numbers of firms colluding successfully. We present an experiment showing that, if managers are deferential toward an authority, firms can induce more collusion by delegating production decisions to middle managers and providing suitable informal nudges. This holds not only with two but also with four firms. We are also able to distinguish compliance effects from coordination effects.

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File URL: http://dx.doi.org/10.1002/soej.12065
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Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 82 (2015)
Issue (Month): 1 (July)
Pages: 13-37

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Handle: RePEc:sej:ancoec:v:82:1:y:2015:p:13-37
Contact details of provider: Web page: http://www.southerneconomic.org/

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