Collusion Under Yardstick Competition. An Experimental Study

CentER Discussion Paper No. 2003-97

24 Pages Posted: 18 Jul 2004

See all articles by Johannes (Jan) J. M. Potters

Johannes (Jan) J. M. Potters

Tilburg University - CentER

Bettina Rockenbach

University of Cologne

Abdolkarim Sadrieh

University of Magdeburg

Eric van Damme

TILEC and CentER, Tilburg University

Date Written: October 2003

Abstract

The effectiveness of relative performance evaluation schemes, such as yardstick competition, can be undermined by collusion. The degree to which the regulated agents manage to collude will be affected by the particulars of the scheme. We hypothesize that in a repeated game setting schemes will be more prone to collusion the smaller are the rents to the agents in case they behave non-cooperatively. We illustrate the relevance of this hypothesis by means of an economic experiment in which we compare the efficiency of two performance evaluation schemes.

Keywords: Relative performance evaluation, yardstick competition, collusion, experiment

JEL Classification: C9, L51

Suggested Citation

Potters, Johannes (Jan) J. M. and Rockenbach, Bettina and Sadrieh, Abdolkarim and van Damme, Eric E.C., Collusion Under Yardstick Competition. An Experimental Study (October 2003). CentER Discussion Paper No. 2003-97. Available at SSRN: https://ssrn.com/abstract=556586 or http://dx.doi.org/10.2139/ssrn.556586

Johannes (Jan) J. M. Potters (Contact Author)

Tilburg University - CentER ( email )

Department of Economics
P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 8204 (Phone)
+31 13 466 3042 (Fax)

Bettina Rockenbach

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany
++49 470 8664 (Phone)
++49 470 8668 (Fax)

Abdolkarim Sadrieh

University of Magdeburg ( email )

Faculty of Economics and Management
Postbox 4120
39016 Magdeburg
Germany

HOME PAGE: http://www.ww.uni-magdeburg.de

Eric E.C. Van Damme

TILEC and CentER, Tilburg University ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 3045 (Phone)
+31 13 466 3066 (Fax)

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