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Controlling Monopoly Power in a Double-Auction Market Experiment

Giuseppe Attanasi (), Kene Boun My, Andrea Guido and Mathieu Lefebvre ()
Additional contact information
Kene Boun My: BETA, Université de Strasbourg
Andrea Guido: Institute for Futures Studies

No 2020-06, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

Abstract: There is robust evidence in the experimental economics literature showing that monopoly power is affected by trading institutions. In this paper we study whether trading institutions themselves can shape agents' market behaviour through the formation of anchors and reference points. We recreate experimentally five different double-auction market structures (perfect competition, perfect competition with quotas, cartel on price, cartel on price with quotas, and monopoly) in a within-subject design, varying the order of markets implementation. We investigate whether monopoly power endures the formation of reference prices emerged in previously implemented market structures. Results from our classroom experiments suggest that double-auction trading institutions succeed in preventing monopolists to exploit their market power. Furthermore, the formation of reference points in previously implemented markets negatively impacts on monopolists' power in later market structures.

Keywords: Double Auctions; Perfect Competition; Monopoly; Market Imperfection; Spillovers; Classroom Experiments (search for similar items in EconPapers)
JEL-codes: C90 D41 D42 D43 D44 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2020-03
New Economics Papers: this item is included in nep-com, nep-des, nep-exp, nep-ind and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:gre:wpaper:2020-06

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