Collusion Through Price Ceilings? In Search of a Focal-Point Effect
29 Pages Posted: 21 Oct 2008
Date Written: October 2008
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: Suggested Citation