An Experimental Examination of Market Concentration and Capacity Effects on Price Competition

Bradley Ewing and Kruse Jamie B
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Kruse Jamie B: East Carolina University and National Oceanic Atmospheric Administration

Journal of Business Valuation and Economic Loss Analysis, 2010, vol. 5, issue 1, 16

Abstract: This research examines the comparative impact of market concentration and excess capacity on the performance of posted-offer experimental markets. We report the results of panel data analysis of 35 markets with or without excess capacity involving two, three, or four sellers. We find that sellers can sustain higher prices in more concentrated laboratory markets. Higher levels of excess capacity lead to lower laboratory market prices supporting the notion that excess capacity reduces the ability of firms to collude as opposed to the view that excess capacity is a trigger strategy punishment that sustains collusion.

Keywords: collusion; market concentration; excess capacity; merger guidelines; laboratory experiment (search for similar items in EconPapers)
Date: 2010
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DOI: 10.2202/1932-9156.1093

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