Wholesale Competition, Open Access Regulation and Tacit Collusion: Experimental Evidence
58 Pages Posted: 10 Aug 2017 Last revised: 24 Dec 2018
Date Written: November 30, 2018
We consider the market scenario where wholesale access for a non-integrated reseller is provided competitively by two vertically integrated firms. In a continuous-time economic laboratory experiment with both student and expert participants we compare market outcomes under different modes of wholesale competition as well as under an open access regulation preventing a margin squeeze. We find that wholesale competition can facilitate tacit collusion, which yields wholesale and retail prices even above the monopoly level. However, we show that a simple price commitment rule can substantially reduce tacit collusion. Moreover, we do not find evidence that margin squeeze regulation benefits consumers.
Keywords: upstream competition; access regulation; vertical integration; margin squeeze regulation; open access; tacit collusion; experimental economics
JEL Classification: C90; L13; L22; L51
Suggested Citation: Suggested Citation