Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/178617
Authors: 
Fonseca, Miguel A.
Li, Yan
Normann, Hans-Theo
Year of Publication: 
2018
Series/Report no.: 
DICE Discussion Paper 289
Abstract: 
Factors facilitating collusion may not successfully predict cartel occurrence: when a factor predicts that collusion (explicit and tacit) becomes easier, firms might be less inclined to set up a cartel simply because tacit coordination already tends to go in hand with supra-competitive profits. We illustrate this issue with laboratory data. We run n-firm Cournot experiments with written cheap-talk communication between players and we compare them to treatments without the possibility to talk. We conduct this comparison for two, four and six firms. We find that two firms indeed find it easier to collude tacitly but that the number of firms does not significantly affect outcomes with communication. As a result, the payoff gain from communication increases with the number of firms, at a decreasing rate.
Subjects: 
cartels
collusion
communication
experiments
repeated games
JEL: 
L42
C90
C70
ISBN: 
978-3-86304-288-2
Document Type: 
Working Paper
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