Tie-Breaking Rules and Divisibility in Experimental Duopoly Markets
This experimental study investigates pricing behavior of sellers in duopoly markets with posted prices and market power. The two treatment variables are given by tie breaking rules and divisibility of the price space. The first treatment variable deals with the rule under which demanded units are allocated between sellers in case of a price tie. A change in divisibility is modeled by making the sellers' price space finer or coarser. The main finding is that the incidence of perfect collusion is significantly higher under the sharing tie breaking rule than under the random (coin-toss) one, especially when the price space is less divisible.
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