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Tie-Breaking Rules and Divisibility in Experimental Duopoly Markets

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  • Puzzello, Daniela

Abstract

We investigate 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. We find 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.

Suggested Citation

  • Puzzello, Daniela, 2006. "Tie-Breaking Rules and Divisibility in Experimental Duopoly Markets," MPRA Paper 6453, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:6453
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    References listed on IDEAS

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    Cited by:

    1. Dijkstra, Peter T., 2015. "Price leadership and unequal market sharing: Collusion in experimental markets," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 80-97.
    2. Lugovskyy, Volodymyr & Puzzello, Daniela & Tucker, Steven, 2010. "An experimental investigation of overdissipation in the all pay auction," European Economic Review, Elsevier, vol. 54(8), pages 974-997, November.
    3. Shakun Datta Mago & Emmanuel Dechenaux, 2009. "Price leadership and firm size asymmetry: an experimental analysis," Experimental Economics, Springer;Economic Science Association, vol. 12(3), pages 289-317, September.

    More about this item

    Keywords

    Collusion; Tie-breaking rules; Divisibility; Bertrand model;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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