Rebels Without a Clue? Experimental Evidence on Partial Cartels
Heinrich Heine Universität Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)
Holger Andreas Rau
April 05, 2013
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 three-stage mechanism with communication which facilitates the formation of a cartel and respectively allows the formation of a partial cartel. All-inclusive cartels are always formed. We find 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: 32
Keywords: Partial Cartels, Coordination, Communication, Experiment
JEL Classification: C92, D2, L41working papers series
Date posted: March 29, 2012 ; Last revised: April 8, 2013
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