Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/190813 
Year of Publication: 
2018
Series/Report no.: 
University of Tübingen Working Papers in Economics and Finance No. 114
Publisher: 
University of Tübingen, Faculty of Economics and Social Sciences, Tübingen
Abstract: 
In a capacity-then-price-setting game we experimentally identify capacity precommitment, the possibility to communicate before price choices, and prior competition experience as crucial factors for collusive pricing. The theoretical analysis determines the capacity thresholds above which firms have an incentive to coordinate on higher prices. The experimental data reveals that such intra-play communication after capacity but before price choices has a collusive effect only for capacity levels exceeding these thresholds. Subjects with high capacities generally choose higher prices when they have the possibility to communicate. Asymmetry in capacity choices decreases the truthfulness of price messages as well as the probability to coordinate on the same price.
Subjects: 
capacity-then-price competition
excessive capacities
cheap talk
intra-play communication
collusion
experimental economics
JEL: 
C72
C91
L1
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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