Wholesale Competition, Open Access Regulation and Tacit Collusion: Experimental Evidence

49 Pages Posted: 10 Aug 2017  

Niklas Horstmann

Karlsruhe Institute of Technology

Jan Kraemer

University of Passau

Daniel Schnurr

University of Passau

Date Written: January 28, 2016

Abstract

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

Horstmann, Niklas and Kraemer, Jan and Schnurr, Daniel, Wholesale Competition, Open Access Regulation and Tacit Collusion: Experimental Evidence (January 28, 2016). Available at SSRN: https://ssrn.com/abstract=2630660 or http://dx.doi.org/10.2139/ssrn.2630660

Niklas Horstmann

Karlsruhe Institute of Technology ( email )

Institute of Information Systems and Marketing
Fritz-Erler-Str. 23
Karlsruhe, 76133
Germany
+49 721 608-48378 (Phone)
+49 721 608-48399 (Fax)

HOME PAGE: http://iism.kit.edu/im/horstmann

Jan Kraemer

University of Passau ( email )

Chair of Internet and Telecommunications Business
Dr.-Hans-Kapfinger-Str. 12
Passau, D-94036
Germany
+498515092580 (Phone)
+498525092582 (Fax)

HOME PAGE: http://www.kraemer.biz

Daniel Schnurr (Contact Author)

University of Passau ( email )

Dr.-Hans-Kapfinger-Str. 12
Passau, 94032
Germany

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