COLLUSION AND FIGHTS IN AN EXPERIMENT WITH PRICE‐SETTING FIRMS AND ADVANCE PRODUCTION*

Jordi Brandts and Pablo Guillen

Journal of Industrial Economics, 2007, vol. 55, issue 3, 453-473

Abstract: We present results from 50‐round duopoly and triopoly experiments. Firms decide repeatedly both on price and quantity of a perishable good. Each firm has capacity to serve the whole market. The stage game does not have an equilibrium in pure strategies. Most markets evolve either to monopolies as a consequence of bankruptcies or to collusion at the monopolistic price. Evolution is faster in markets with two than in those with three firms. Therefore, over time average price is lower with three than with two. Consumer surplus is higher with three firms, but efficiency is lower in markets with three firms.

Date: 2007
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https://doi.org/10.1111/j.1467-6451.2007.00319.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jindec:v:55:y:2007:i:3:p:453-473

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