Risk Aversion and Tacit Collusion in a Bertrand Duopoly Experiment

Lisa R. Anderson, Beth A. Freeborn and Jason Hulbert ()
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Jason Hulbert: Department of Economics, College of William and Mary

No 84, Working Papers from Department of Economics, College of William and Mary

Abstract: We investigate the relationship between collusive behavior in Bertrand oligopoly experiments and subject heterogeneity in risk preferences. We find that risk aversion is positively associated with tacit collusion when the goods are complements, but find no evidence of collusive behavior when the goods are substitutes. Furthermore, risk aversion is associated with lower prices with complement goods, but does not impact pricing behavior with substitute goods. In both treatments, we find that subjects tend to follow the price change of the other seller. In the complements treatment, however, this tendency increases with the degree of risk aversion.

Keywords: Bertrand duopoly; risk aversion; collusion; experiment (search for similar items in EconPapers)
JEL-codes: C9 L1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-exp, nep-mic and nep-upt
Date: 2009-06-11
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Persistent link: http://EconPapers.repec.org/RePEc:cwm:wpaper:84

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