Abstract

http://ssrn.com/abstract=1937803
 
 

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Explicit vs. Tacit Collusion - The Impact of Communication in Oligopoly Experiments


Miguel Alexandre Fonseca


University of Exeter Business School

Hans-Theo Normann


Heinrich Heine Universität Dusseldorf - Department of Economics; Max Planck Institute for Research on Collective Goods

July 3, 2011


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 obtain higher profits for any number of firms, however, the gain from communicating is non-monotonic in the number of firms, with medium-sized industries having the largest additional profit 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.

Number of Pages in PDF File: 38

Keywords: cartels, collusion, communication, experiments, repeated games.

JEL Classification: C7, C9, L4, L41

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Date posted: October 4, 2011  

Suggested Citation

Fonseca, Miguel Alexandre and Normann, Hans-Theo, Explicit vs. Tacit Collusion - The Impact of Communication in Oligopoly Experiments (July 3, 2011). Available at SSRN: http://ssrn.com/abstract=1937803 or http://dx.doi.org/10.2139/ssrn.1937803

Contact Information

Miguel Alexandre Fonseca (Contact Author)
University of Exeter Business School ( email )
Streatham Court
Xfi Building, Rennes Dr.
Exeter, EX4 4JH
United Kingdom
Hans-Theo Normann
Heinrich Heine Universität Dusseldorf - Department of Economics ( email )
Duesseldorf
Germany
Max Planck Institute for Research on Collective Goods ( email )
Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

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