Why factors facilitating collusion may not predict cartel occurrence: Experimental evidence

Miguel Fonseca, Yan Li and Hans-Theo Normann

No 289, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: Factors facilitating collusion may not successfully predict cartel occurrence: when a factor predicts that collusion (explicit and tacit) becomes easier, firms might be less inclined to set up a cartel simply because tacit coordination already tends to go in hand with supra-competitive profits. We illustrate this issue with laboratory data. We run n-firm Cournot experiments with written cheap-talk communication between players and we compare them to treatments without the possibility to talk. We conduct this comparison for two, four and six firms. We find that two firms indeed find it easier to collude tacitly but that the number of firms does not significantly affect outcomes with communication. As a result, the payoff gain from communication increases with the number of firms, at a decreasing rate.

Keywords: cartels; collusion; communication; experiments; repeated games (search for similar items in EconPapers)
JEL-codes: C70 C90 L42 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-bec, nep-com, nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: Why factors facilitating collusion may not predict cartel occurrence — experimental evidence (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:289

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