Collusion Through Price Ceilings? In Search of a Focal-Point Effect

29 Pages Posted: 21 Oct 2008

See all articles by Dirk Engelmann

Dirk Engelmann

University of London - Royal Holloway - Department of Economics

Wieland Müller

University of Vienna, Department of Economics & VCEE; Tilburg University, Department of Economics & CentER

Date Written: October 2008

Abstract

With this study we resume the search for a collusive focal-point effect of price ceilings in laboratory markets. We argue that market conditions in previous studies were unfavorable for collusion which may have been responsible for not finding such a focal-point effect. Our design aims at maximizing the likelihood of a focal-point effect. Nevertheless, our results again fail to support the focal-point hypothesis. Collusion is as unlikely in markets with a price ceiling as in markets with unconstrained pricing. Overall, the static Nash equilibrium predicts the data fairly accurately. We argue that this might warrant re-interpretation of field studies on anti-competitive effects of price ceilings.

Keywords: Collusion, competition policy, experimental economics, focal point

JEL Classification: F13, L13, C92

Suggested Citation

Engelmann, Dirk and Müller, Wieland, Collusion Through Price Ceilings? In Search of a Focal-Point Effect (October 2008). TILEC Discussion Paper No. 2008-036. Available at SSRN: https://ssrn.com/abstract=1281450 or http://dx.doi.org/10.2139/ssrn.1281450

Dirk Engelmann

University of London - Royal Holloway - Department of Economics ( email )

Egham, TW20 0EX
United Kingdom

Wieland Müller (Contact Author)

University of Vienna, Department of Economics & VCEE ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

HOME PAGE: http://https://homepage.univie.ac.at/wieland.mueller/

Tilburg University, Department of Economics & CentER ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/w.mueller-3.htm

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