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Imperfect tacit collusion and asymmetric price transmission

Muhammed Bulutay (), David Hales, Patrick Julius and Weiwei Tasch

Journal of Economic Behavior & Organization, 2021, vol. 192, issue C, 584-599

Abstract: We investigate asymmetric price transmission (APT) in laboratory experiments and find that imperfect tacit collusion is likely the cause in our otherwise frictionless markets. We vary the number of sellers across markets to evaluate the role competition plays in APT. We report similar magnitudes of asymmetry in markets with 3, 4, 6, and 10 sellers, but not in duopolies. Furthermore, sellers consistently set their prices above the best-response levels implied by their forecasts, particularly in periods following negative shocks. We interpret these pricing deviations as sellers’ intentions to collude, and note that they mechanically drive the pricing asymmetries we observe.

Keywords: Asymmetric price transmission; Tacit collusion; Oligopolistic competition; Market power; Rockets and feathers (search for similar items in EconPapers)
JEL-codes: C72 C73 C92 D43 L13 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jebo.2021.10.018

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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