Abstract

http://ssrn.com/abstract=2030331
 
 

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Rebels Without a Clue? Experimental Evidence on Partial Cartels


Georg Clemens


Heinrich Heine Universität Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Holger Andreas Rau


University Erlangen-Nuremberg

June 2014


Abstract:     
This paper provides experimental evidence on the formation of partial cartels with endogenous coordination. Firms face a coordination challenge when a partial cartel is to be formed as every firm is better off if it is not inside the cartel but is a free-riding outsider. We introduce a two-stage mechanism with communication which facilitates the formation of a cartel and respectively allows the formation of a partial cartel. We find that the communication option and the two-stage mechanism serve as powerful instruments enhancing firms to form all-inclusive cartels which are always formed. Our control treatments emphasize that firms face problems to form cartels in the absence of communication. Strikingly, our results highlight that partial cartels are frequently rejected out-of-equilibrium if outside firms profit excessively from the formation of the cartel.

Number of Pages in PDF File: 36

Keywords: Partial Cartels, Coordination, Communication, Experiment

JEL Classification: C92, D2, L41

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Date posted: March 29, 2012 ; Last revised: June 1, 2014

Suggested Citation

Clemens, Georg and Rau, Holger Andreas, Rebels Without a Clue? Experimental Evidence on Partial Cartels (June 2014). Available at SSRN: http://ssrn.com/abstract=2030331 or http://dx.doi.org/10.2139/ssrn.2030331

Contact Information

Georg Clemens
Heinrich Heine Universität Dusseldorf - Duesseldorf Institute for Competition Economics (DICE) ( email )
Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany
Holger Andreas Rau (Contact Author)
University Erlangen-Nuremberg ( email )
Lange Gasse 20
Nuremberg, 90403
Germany
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