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http://ssrn.com/abstract=1502622
 
 

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Collusion in Experimental Bertrand Duopolies with Convex Costs: The Role of Information and Cost Asymmetry


Cédric Argenton


Tilburg Law and Economics Center (TILEC); Tilburg University - Center and Faculty of Economics and Business Administration

Wieland Müller


Tilburg University - Center and Faculty of Economics and Business Administration

November 6, 2009

CentER Discussion Paper Series No. 2009-87

Abstract:     
We report the results of a series of experimental Bertrand duopolies where firms have convex costs. Theoretically, these duopolies are characterized by a multiplicity of Nash equilibria. Using a 2x2 design, we analyze price choices in symmetric and asymmetric markets under two information conditions: complete versus incomplete information about profits. We find that information has no effect in symmetric markets with respect to market prices and the time it takes for markets to stabilize. However, in asymmetric markets, complete information leads to higher average market prices and quicker convergence of price choices.

Number of Pages in PDF File: 31

Keywords: Bertrand competition, convex costs, collusion, coordination, experimental economics

JEL Classification: L13, C72, C92

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Date posted: November 9, 2009  

Suggested Citation

Argenton, Cédric and Müller, Wieland, Collusion in Experimental Bertrand Duopolies with Convex Costs: The Role of Information and Cost Asymmetry (November 6, 2009). CentER Discussion Paper Series No. 2009-87. Available at SSRN: http://ssrn.com/abstract=1502622 or http://dx.doi.org/10.2139/ssrn.1502622

Contact Information

Cédric Argenton (Contact Author)
Tilburg Law and Economics Center (TILEC) ( email )
Warandelaan 2
Tilburg, 5000 LE
Netherlands
Tilburg University - Center and Faculty of Economics and Business Administration ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Wieland Müller
Tilburg University - Center and Faculty of Economics and Business Administration ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
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