The Relative Efficacy of Price Announcements and Express Communication for Collusion: Experimental Findings

Joseph Harrington (), Roberto Hernan-Gonzalez () and Praveen Kujal
Additional contact information
Joseph Harrington: Dept of Business Economics & Public Policy, The Wharton School, University of Pennsylvania
Roberto Hernan-Gonzalez: Dept of Economic Theory and History, Universidad de Granada
Authors registered in the RePEc Author Service: Roberto Hernán González

Working Papers from Chapman University, Economic Science Institute

Abstract: Collusion is when firms coordinate on suppressing competition, and coordination typically requires that firms communicate in some manner. This study conducts experiments to determine what modes of communications are able to produce and sustain collusion and how the efficacy of communication depends on firm heterogeneity and the number of firms. We consider two different communication treatments: non-binding price announcements and unrestricted written communication. Our main findings are that price announcements allow subjects to coordinate on a high price but only under duopoly and when firms are symmetric. While price announcements do result in higher prices when subjects are asymmetric, there is little evidence that they are coordinating their behavior. When subjects are allowed to engage in unrestricted communication, coordination on high prices occurs whether they are symmetric or asymmetric. We find that the incremental value to express communication (compared to price announcements) is greater when firms are asymmetric and there are more firms.

Pages: 45 pages
Date: 2013
New Economics Papers: this item is included in nep-bec, nep-com and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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http://www.chapman.edu/research-and-institutions/e ... cation-practices.pdf

Related works:
Journal Article: The relative efficacy of price announcements and express communication for collusion: Experimental findings (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:13-30

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