Collusion Through Price Ceilings? In Search of a Focal-Point Effect
University of London - Royal Holloway - Department of Economics
Tilburg University - Department of Economics; University of Vienna - Faculty of Business, Economics, and Statistics
TILEC Discussion Paper No. 2008-036
With this study we resume the search for a collusive focal-point effect of price ceilings in laboratory markets. We argue that market conditions in previous studies were unfavorable for collusion which may have been responsible for not finding such a focal-point effect. Our design aims at maximizing the likelihood of a focal-point effect. Nevertheless, our results again fail to support the focal-point hypothesis. Collusion is as unlikely in markets with a price ceiling as in markets with unconstrained pricing. Overall, the static Nash equilibrium predicts the data fairly accurately. We argue that this might warrant re-interpretation of field studies on anti-competitive effects of price ceilings.
Number of Pages in PDF File: 29
Keywords: Collusion, competition policy, experimental economics, focal point
JEL Classification: F13, L13, C92working papers series
Date posted: October 21, 2008
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