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Communication and Market Sharing: An Experiment on the Exchange of Soft and Hard Information

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  • Freitag, Andreas

    (University of Basel)

  • Roux, Catherine

    (University of Basel)

  • Thöni, Christian

Abstract

We study the role of communication in collusive market sharing. In a series of Cournot oligopoly experiments with multiple markets and repeated interaction, we vary the types of information that firms can exchange. We distinguish between hard information-verifiable information about past conduct-and soft information- unbinding information about future conduct. We find that the effect of communication on the firms' ability to collude depends on the type of information available: market prices increase only slightly when hard information allows perfect monitoring of rivals' past actions, but the price raise due to soft information, however, is substantial. The explicit consent of each cartel member to a common collusive strategy, even if stated only once, drives this strong effect. Our results point to the types and contents of communication that should be of particular concern to antitrust authorities.

Suggested Citation

  • Freitag, Andreas & Roux, Catherine & Thöni, Christian, 2019. "Communication and Market Sharing: An Experiment on the Exchange of Soft and Hard Information," Working papers 2019/23, Faculty of Business and Economics - University of Basel.
  • Handle: RePEc:bsl:wpaper:2019/23
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    More about this item

    Keywords

    Collusion; Market Sharing; Cournot Oligopoly; Information; Communication; Experiments;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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