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Pricing behavior in partial cartels

Johannes Odenkirchen

No 299, DICE Discussion Papers from University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: We analyze the pricing behavior of firms when explicit partial cartels have formed in experimental markets through communication. Using a repeated, asymmetric capacity constraint price game, we show that, in line with theory, a partial cartel is sufficient to increase market prices for all firms. Moreover, we find that prices of cartel insiders and outsiders are not necessarily on the same level what contradicts common theoretical predictions. This is because communication allows cartel members to overcome a potential coordination problem and enables an equilibrium in (joint) mixed strategies to emerge. The results therefore underline the importance of communication in explicit cartels and the resulting market outcomes.

Keywords: partial cartels; explicit collusion; umbrella effects; experiments (search for similar items in EconPapers)
JEL-codes: C92 D03 L13 L41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-exp, nep-gth and nep-ind
Date: 2018
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https://www.econstor.eu/bitstream/10419/181967/1/1030432252.pdf (application/pdf)

Related works:
Working Paper: Pricing Behavior of Cartel Outsiders in Incomplete Cartels (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:299

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