Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/231385
Year of Publication: 
2021
Publisher: 
ZBW - Leibniz Information Centre for Economics, Kiel, Hamburg
Abstract: 
We investigate the role tacit collusion plays in Asymmetric Price Transmission (APT), the tendency of prices to respond more rapidly to positive than to negative cost shocks. Using a laboratory experiment that isolates the effects of tacit collusion, we observe APT pricing behavior in markets with 3, 4, 6, and 10 sellers, but not in duopolies. Furthermore, we find that sellers accurately forecast others’ prices, but nevertheless consistently set their own prices above the profit-maximizing response, particularly in the periods immediately following negative shocks. Overall, our findings support theories in which tacit collusion plays a central role in APT.
Subjects: 
Asymmetric Price Transmission
Tacit Collusion
Oligopolistic Competition
Market Power
Rockets and Feathers
JEL: 
D43
L13
C92
C72
C73
Document Type: 
Preprint

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