Number Effects and Tacit Collusion in Experimental Oligopolies

Abstract

We systematically investigate the relationship between the number of firms in a market and tacit collusion by means of a meta-analysis of the literature on oligopoly experiments as well as two of our own experiments with a total of 368 participants. We show that the degree of tacit collusion decreases strictly with the number of competitors in industries with two, three and four firms. Although previous literature could not affirm that triopolies are more collusive than quadropolies, we provide evidence for this fact for symmetric and asymmetric firms under Bertrand and Cournot competition.

Keywords: Experimental economics, Oligopolies, Tacit collusion, Number of competitors

JEL Classification: L13, D21, D43, C92