Institutional Authority and Collusion

Axel Sonntag and Daniel Zizzo

No 14-02, Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) from School of Economics, University of East Anglia, Norwich, UK.

Abstract: A `collusion puzzle' exists by which, even though increasing the number of firms reduces the ability to tacitly collude, and leads to a collapse in collusion in experimental markets with four or more firms, in natural markets there are such numbers of firms colluding successfully. We present an experiment showing that, if managers are deferential towards an authority, firms can induce more collusion by delegating production decisions to middle managers and providing suitable informal nudges. This holds not only with two but also with four firms. We are also able to distinguish compliance effects from coordination effects from the nudges.

Keywords: collusion; Cournot; oligopoly; authority; delegation; coordination (search for similar items in EconPapers)
JEL-codes: C91 L13 L22 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-com, nep-exp and nep-ind
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Citations: View citations in EconPapers (5)

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Journal Article: Institutional authority and collusion (2015)
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