Business Economics and Public Policy Papers

Document Type

Journal Article

Date of this Version

8-2016

Publication Source

Journal of Economic Behavior & Organization

Volume

128

Start Page

251

Last Page

264

DOI

10.1016/j.jebo.2016.05.014

Abstract

This study conducts experiments to determine the modes of communication that are able to produce and sustain collusion and how the efficacy of communication depends on market structure. Two communication treatments are considered: non-binding price announcements and unrestricted written communication. We find that price announcements are conducive to coordinating on a high price but only under duopoly and when firms are symmetric. The standard experimental finding that collusion without communication is rare when there are more than two firms is shown to be robust to allowing firms to make price announcements. When firms are asymmetric, price announcements do result in higher prices but there is little evidence that firms are coordinating their behavior. When firms are allowed to engage in unrestricted written communication, coordination on high prices occurs for all market structures. We find that the incremental value to express communication (compared to price announcements) is greater when firms are asymmetric and there are more firms.

Copyright/Permission Statement

© 2016. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

collusion, price announcements, experiments

Embargo Date

5-30-2019

Available for download on Thursday, May 30, 2019

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Date Posted: 27 November 2017

This document has been peer reviewed.