Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/265530 
Year of Publication: 
2022
Series/Report no.: 
DICE Discussion Paper No. 392
Publisher: 
Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE), Düsseldorf
Abstract: 
This paper investigates pricing in laboratory markets when human players interact with an algorithm. We compare the degree of competition when exclusively humans interact to the case of one firm delegating its decisions to an algorithm, an n-player generalization of tit-for-tat. We further vary whether participants know about the presence of the algorithm. When one of three firms in a market is an algorithm, we observe significantly higher prices compared to human-only markets. Firms employing an algorithm earn significantly less profit than their rivals. (Un)certainty about the actual presence of an algorithm does not significantly affect collusion, although humans do seem to perceive algorithms as more disruptive.
Subjects: 
algorithms
collusion
human-computer interaction
labora-tory experiments
JEL: 
C90
L41
ISBN: 
978-3-86304-391-9
Document Type: 
Working Paper

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