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Title:Testing forbearance experimentally: Duopolistic competition of conglomerate firms PDF Logo
Authors:Güth, Werner
Häger, Kirsten
Kirchkamp, Oliver
Schwalbach, Joachim
Issue Date:2010
Series/Report no.:Jena economic research papers 2010,043
Abstract:Like Feinberg and Sherman (1985) and Phillips and Mason (1992) we test experimentally whether conglomerate firms, i.e., firms competing on multiple structurally unrelated markets, can effectively limit competition. Our more general analysis assumes differentiated rather than homogeneous products and distinguishes strategic substitutes as well as complements to test this forbearance hypothesis. Rather than only a partners design we also explore a random strangers design to disentangle effects of forbearance and repeated interaction. Surprisingly, conglomerate firms do not limit competition, they rather foster it. More in line with our expectations we find more cooperation in complement markets than in substitute markets and also more cooperation in a partners than in a strangers matching.
Subjects:Experiment
Forbearance
Competition
JEL:C91
D43
L41
Document Type:Working Paper
Appears in Collections:Jena Economic Research Papers, MPI für Ökonomik

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