The effect of industry structure and yardstick design on strategic behavior with yardstick competition

Peter Dijkstra, Marco Haan and Machiel Mulder

No 13008-EEF, Research Report from University of Groningen, Research Institute SOM (Systems, Organisations and Management)

Abstract: We present an experiment on yardstick competition. Experimental firms set cost levels in each period and can communicate with each other in an attempt to increase the regulated price. We find that when market shares are heterogeneous, collusion is least frequent and prices are lowest. The number of players on a market also infuences prices, but to a lesser extent. Comparing across yardsticks, the discriminatory yardstick yields the lowest prices, while a best-practice yardstick yields the highest prices.

Date: 2013
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