Collusion and Fights in an Experiment with Price-Setting Firms and Production in Advance

Pablo Guillén and Jordi Brandts
Authors registered in the RePEc Author Service: Pablo Guillen

No 141, Working Papers from Barcelona School of Economics

Abstract: We present results from 50-round market experiments in which firms decide repeatedly both on price and quantity of a completely perishable good. Each firm has capacity to serve the whole market. The stage game does not have an equilibrium in pure strategies. We run experiments for markets with two and three identical firms. Firms tend to cooperate to avoid fights, but when they fight bankruptcies are rather frequent. On average, pricing behavior is closer to that for pure quantity than for pure price competition and price and efficiency levels are higher for two than for three firms. Consumer surplus increases with the number of firms, but unsold production leads to higher efficiency losses with more firms. Over time prices tend to the highest possible one for markets both with two and three firms.

Keywords: experiments; Collusion; oligopoly (search for similar items in EconPapers)
JEL-codes: C91 D43 (search for similar items in EconPapers)
Date: 2015-09
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Working Paper: Collusion and Fights in an Experiment with Price-Setting Firms and Production in Advance (2004)
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