Collusion in Experimental Bertrand Duopolies with Convex Costs: The Role of Information and Cost Asymmetry

CentER Discussion Paper Series No. 2009-87

31 Pages Posted: 9 Nov 2009

See all articles by Cédric Argenton

Cédric Argenton

Tilburg Law and Economics Center (TILEC); Tilburg University - Tilburg University School of Economics and Management

Wieland Müller

Tilburg University - Tilburg University School of Economics and Management

Date Written: November 6, 2009

Abstract

We report the results of a series of experimental Bertrand duopolies where firms have convex costs. Theoretically, these duopolies are characterized by a multiplicity of Nash equilibria. Using a 2x2 design, we analyze price choices in symmetric and asymmetric markets under two information conditions: complete versus incomplete information about profits. We find that information has no effect in symmetric markets with respect to market prices and the time it takes for markets to stabilize. However, in asymmetric markets, complete information leads to higher average market prices and quicker convergence of price choices.

Keywords: Bertrand competition, convex costs, collusion, coordination, experimental economics

JEL Classification: L13, C72, C92

Suggested Citation

Argenton, Cédric and Müller, Wieland, Collusion in Experimental Bertrand Duopolies with Convex Costs: The Role of Information and Cost Asymmetry (November 6, 2009). CentER Discussion Paper Series No. 2009-87, Available at SSRN: https://ssrn.com/abstract=1502622 or http://dx.doi.org/10.2139/ssrn.1502622

Cédric Argenton (Contact Author)

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Wieland Müller

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
114
Abstract Views
855
rank
297,843
PlumX Metrics