Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144805
Authors: 
Möllers, Claudia
Normann, Hans-Theo
Snyder, Christopher M.
Year of Publication: 
2016
Series/Report no.: 
DICE Discussion Paper 226
Abstract: 
When an upstream monopolist supplies several competing downstreamfirms, it may fail to monopolize the market because it is unable to commit not to behave opportunistically. We build on previous experimental studies of this well-known commitment problem by introducing communication. Allowing the upstream firm to chat privately with each downstream firm reduces total offered quantity from near the Cournot level (observed in the absence of communication) halfway toward the monopoly level. Allowing all three firms to chat together openly results in complete monopolization. Downstream firms obtain such a bargaining advantage from open communication that all of the gains from monopolizing the market accrue to them. A simple structural model of Nash-in-Nash bargaining fits the pattern of shifting surpluses well. Using third-party coders, unsupervised text mining, among other approaches, we uncover features of the rich chat data that are correlated with market outcomes. We conclude with a discussion of the antitrust implications of open communication in vertical markets.
Subjects: 
commitment
communication
experiments
vertical restraints
JEL: 
L42
K21
C90
C70
ISBN: 
978-3-86304-225-7
Document Type: 
Working Paper

Files in This Item:
File
Size
877.46 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.