Why Factors Facilitating Collusion May Not Predict Cartel Occurrence - Experimental Evidence



Fonseca, M, Li, Y ORCID: 0000-0002-9053-6233 and Normann, HT
(2018) Why Factors Facilitating Collusion May Not Predict Cartel Occurrence - Experimental Evidence. Southern Economic Journal, 85 (1). pp. 255-275.

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Abstract

<jats:p>Factors facilitating collusion may not successfully predict cartel occurrence: When a factor predicts that collusion (explicit and tacit) becomes easier, firms might be less inclined to set up a cartel simply because tacit coordination already tends to go in hand with supra‐competitive profits. We illustrate this issue with laboratory data. We run <jats:italic>n</jats:italic>‐firm Cournot experiments with written cheap‐talk communication between players and we compare them to treatments without the possibility to talk. We conduct this comparison for two, four, and six firms. We find that two firms indeed find it easier to collude tacitly but that the number of firms does not significantly affect outcomes with communication. As a result, the payoff gain from communication increases with the number of firms, at a decreasing rate.</jats:p>

Item Type: Article
Depositing User: Symplectic Admin
Date Deposited: 31 May 2018 07:40
Last Modified: 02 Oct 2023 14:34
DOI: 10.1002/soej.12278
Related URLs:
URI: https://livrepository.liverpool.ac.uk/id/eprint/3021946