Abstract

http://ssrn.com/abstract=1533168
 
 

References (42)



 
 

Citations (3)



 


 



Communication, Renegotiation, and the Scope for Collusion


David J. Cooper


Florida State University - Department of Economics; University of East Anglia (UEA) - Centre for Behavioural and Experimental Social Science (CBESS)

Kai-Uwe Kuhn


University of Michigan at Ann Arbor - Department of Economics; Centre for Economic Policy Research (CEPR)

November 2009

CEPR Discussion Paper No. DP7563

Abstract:     
We use experiments to analyze what type of communication is most effective in achieving cooperation in a simple collusion game. Consistent with the existing literature on communication and collusion, even minimal communication leads to a short run increase in collusion. However, in a limited message-space treatment where subjects cannot communicate contingent strategies, this initial burst of collusion rapidly collapses. When unlimited pre-game communication is allowed via a chat window, an initial decline in collusion is reversed over time. Content analysis is used to identify multiple channels by which communication improves collusion in this setting. Explicit threats to punish cheating prove to be by far the most important factor to successfully establish collusion, consistent with the existing theory of collusion. However, collusion is even more likely when we allow for renegotiation, contrary to standard theories of renegotiation. What appears critical for the success of collusion with renegotiation is that cheaters are often admonished in strong terms. Allowing renegotiation therefore appears to increase collusion by allowing for an inexpensive and highly effective form of punishment.

Number of Pages in PDF File: 60

Keywords: collusion, communication, experiments, guilt aversion, renegotiation, trust

JEL Classification: C72, C73, C92, D03, D43, L13, L41

working papers series





Date posted: January 11, 2010  

Suggested Citation

Cooper, David J. and Kuhn, Kai-Uwe, Communication, Renegotiation, and the Scope for Collusion (November 2009). CEPR Discussion Paper No. DP7563. Available at SSRN: http://ssrn.com/abstract=1533168

Contact Information

David J. Cooper (Contact Author)
Florida State University - Department of Economics ( email )
Tallahassee, FL 30306-2180
United States
University of East Anglia (UEA) - Centre for Behavioural and Experimental Social Science (CBESS) ( email )
United Kingdom
Kai-Uwe Kuhn
University of Michigan at Ann Arbor - Department of Economics ( email )
611 Tappan Street
Ann Arbor, MI 48109-1220
United States
734-763-5317 (Phone)
734-764-2769 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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