Explicit vs. tacit collusion: the impact of communication in oligopoly experiments
Fonseca, Miguel A.; Normann, Hans-Theo
Date: 12 September 2012
Article
Journal
European Economic Review
Publisher
Elsevier
Publisher DOI
Abstract
We explore the difference between explicit and tacit collusion by investigating the
impact communication has in experimental markets. For Bertrand oligopolies with
various numbers of firms, we compare pricing behavior with and without the possibility
to communicate among firms. We find strong evidence that talking helps to ...
We explore the difference between explicit and tacit collusion by investigating the
impact communication has in experimental markets. For Bertrand oligopolies with
various numbers of firms, we compare pricing behavior with and without the possibility
to communicate among firms. We find strong evidence that talking helps to obtain
higher pro fits for any number of firms, however, the gain from communicating is nonmonotonic
in the number of firms, with medium-sized industries having the largest
additional profi t from talking. We also find that industries continue to collude successfully
after communication is disabled. Communication supports firms in coordinating
on collusive pricing schemes, and it is also used for conflict mediation.
Economics
Faculty of Environment, Science and Economy
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