Spillovers from legal cooperation to tacit collusion

Jeroen Hinloopen, Stephen Martin and Leonard Treuren

No 746847, Working Papers of Department of Management, Strategy and Innovation, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven

Abstract: Antitrust laws prohibit collusion by private firms, yet many types of interfirm coopera tion are legal. Using laboratory experiments, we study spillovers from legal cooperation in one market to tacit collusion in a different market. Subjects sequentially play two homogeneous goods Bertrand games once against the same opponent. We vary whether subjects can form binding price agreements in the first market. We find that allowing subjects to coordinate their prices in the first market significantly increases prices in the second market, elevating the incidence of non-competitive market prices by more than 60 percent. This shows that repeated interaction and communication are not necessary to achieve non-competitive prices, as long as subjects can form binding agreements in a different market. Additional treatments suggest that commitment and multimarket contact are both necessary and sufficient for spillovers from legal cooperation to tacit collusion to emerge.

Pages: 50
Date: 2023-06
New Economics Papers: this item is included in nep-com, nep-exp, nep-gth, nep-law and nep-reg
Note: paper number DPS 23.12
References: Add references at CitEc
Citations:

Forthcoming in FEB Research Report Department of Economics

Downloads: (external link)
https://lirias.kuleuven.be/retrieve/771562 Published version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ete:msiper:746847

Access Statistics for this paper

More papers in Working Papers of Department of Management, Strategy and Innovation, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven
Bibliographic data for series maintained by library EBIB ().