Pure Numbers Effects, Market Power, and Tacit Collusion in Posted Offer Markets

Douglas Davis

No 603, Working Papers from VCU School of Business, Department of Economics

Abstract: This paper studies the effects of seller concentration and static market power on tacit collusion in extensively repeated laboratory posted-offer markets. Contrary to the implications of some earlier research, we find that tacit collusion does not become pervasive with extensive repetition. In a ‘strong no power’ design persistently competitive outcomes are observed in markets with three or four sellers. Even duopolies are frequently competitive in this design. Unilateral market power raises prices, as predicted. However, static Nash predictions fail to organize outcomes across power treatments, because tacit collusion moves inversely with concentration. Excess capacity appears to explain observed tacit collusion levels.

Keywords: experiments; market concentration; market power (search for similar items in EconPapers)
JEL-codes: C9 D4 L4 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006-09, Revised 2009-01
New Economics Papers: this item is included in nep-com, nep-exp and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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http://www.people.vcu.edu/~dddavis/working%20papers/Davis_01_09_09.pdf Revised version, 2009 (application/pdf)

Related works:
Journal Article: Pure numbers effects, market power, and tacit collusion in posted offer markets (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:vcu:wpaper:0603

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