Testing Forbearance Experimentally - Duopolistic Competition of Conglomerate Firms

Werner Güth (), Kirsten Häger, Oliver Kirchkamp and Joachim Schwalbach
Additional contact information
Kirsten Häger: Universität Jena
Joachim Schwalbach: Humboldt-Universität zu Berlin, Institute of Management

No 2010-043, Jena Economics Research Papers from Friedrich-Schiller-University Jena

Abstract: Like Feinberg and Sherman (1985) and Phillips and Mason (1992) we test experimentally whether conglomerate firms, i.e., firms competing on multiple structurally unrelated markets, can effectively limit competition. Our more general analysis assumes differentiated rather than homogeneous products and distinguishes strategic substitutes as well as complements to test this forbearance hypothesis. Rather than only a partners design we also explore a random strangers design to disentangle effects of forbearance and repeated interaction. Surprisingly, conglomerate firms do not limit competition, they rather foster it. More in line with our expectations we find more cooperation in complement markets than in substitute markets and also more cooperation in a partners than in a strangers matching.

Keywords: Experiment; Forbearance; Competition (search for similar items in EconPapers)
JEL-codes: C91 D43 L41 (search for similar items in EconPapers)
Date: 2010-07-01
New Economics Papers: this item is included in nep-com, nep-exp and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Testing Forbearance Experimentally: Duopolistic Competition of Conglomerate Firms (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:jrp:jrpwrp:2010-043

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