Do Antitrust Laws Facilitate Collusion? Experimental Evidence on Costly Communication in Duopolies
Using Bertrand supergames with communication, we study price formation and stability of collusive agreements on experimental duopoly markets. The experimental design consists of three treatments with different costs of communication: zero-cost, low-cost and high-cost. We find that increasing the cost of communication results in a significantly higher price level. Moreover, making communication costly decreases the number of messages, but more importantly, it enhances the stability of collusive agreements. By letting the cost of communication symbolize the presence of an antitrust law that prohibits firms from discussing prices, McCutcheon (1997) presents an interesting application to antitrust policy. The experimental results support her theoretical prediction that antitrust laws might work in the interest of firms.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||13 Apr 2004|
|Date of revision:||13 Sep 2004|
|Publication status:||Published in The Scandinavian Journal of Economics, 2007, pages 321-339.|
|Contact details of provider:|| Postal: |
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
More information through EDIRC
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.:
- Camerer, Colin F & Hogarth, Robin M, 1999.
"The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework,"
Journal of Risk and Uncertainty,
Springer, vol. 19(1-3), pages 7-42, December.
- Camerer, Colin F. & Hogarth, Robin M., 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Working Papers 1059, California Institute of Technology, Division of the Humanities and Social Sciences.
- Farrell, Joseph & Maskin, Eric, 1989.
"Renegotiation in repeated games,"
Games and Economic Behavior,
Elsevier, vol. 1(4), pages 327-360, December.
- Joseph Farrell and Eric Maskin., 1987. "Renegotiation in Repeated Games," Economics Working Papers 8759, University of California at Berkeley.
- Farrell, Joseph & Maskin, Eric, 1987. "Renegotiation in Repeated Games," Department of Economics, Working Paper Series qt9wv3h5jb, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Douglas Bernheim, B. & Ray, Debraj, 1989. "Collective dynamic consistency in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 295-326, December.
- Gary Charness & Martin Dufwenberg, 2006.
"Promises and Partnership,"
Econometric Society, vol. 74(6), pages 1579-1601, November.
- Tore Ellingsen & Magnus Johannesson, 2004. "Promises, Threats and Fairness," Economic Journal, Royal Economic Society, vol. 114(495), pages 397-420, 04.
- Blume, A., 1991.
"Intra-Play Communication in Repeated Games,"
91-29, University of Iowa, Department of Economics.
- Evans, Robert & Maskin, Eric, 1989. "Efficient renegotiation--proof equilibria in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 361-369, December.
- Dufwenberg, Martin & Gneezy, Uri, 2002. "Information disclosure in auctions: an experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 48(4), pages 431-444, August.
When requesting a correction, please mention this item's handle: RePEc:hhs:lunewp:2004_014. 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: (David Edgerton)
If references are entirely missing, you can add them using this form.