The Impact of Forward Trading on Tacit Collusion: Experimental Evidence

Jens Schubert

MPRA Paper from University Library of Munich, Germany

Abstract: This article reports the results of a laboratory experiment that examines the strategic effect of forward contracts on market power in infinitely repeated duopolies. Two competing effects motivate the experimental design. Allaz and Vila (1993) argue that forward markets act like additional competitors in that they increase quantity competition among firms. Conversely, Liski and Montero (2006) argue that forward contracting can facilitate collusive outcomes by enabling firms to soften competition. The experiment provides a first simultaneous test of these rival effects. Contrary to previous experimental studies, the results do not support the quantity-competition effect. Further, the findings provide evidence in support of the collusive hypothesis.

Keywords: Cournot oligopoly; Collusion; Experiments; Forward markets; Electricity markets (search for similar items in EconPapers)
JEL-codes: C72 C91 D43 L13 Q49 (search for similar items in EconPapers)
Date: 2013-01-01
New Economics Papers: this item is included in nep-bec, nep-com, nep-ene and nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:43768

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