Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/287151 
Year of Publication: 
2021
Citation: 
[Journal:] Theory and Decision [ISSN:] 1573-7187 [Volume:] 93 [Issue:] 2 [Publisher:] Springer US [Place:] New York, NY [Year:] 2021 [Pages:] 237-257
Publisher: 
Springer US, New York, NY
Abstract: 
This paper analyzes the coordination challenge a partial cartel faces when payoff asymmetries between potential cartel insiders and potential cartel outsiders are large. We introduce two experimental treatments: a standard treatment where a complete cartel can be supported in a Nash equilibrium and a modified treatment where a complete cartel and a partial cartel can both be supported in a Nash equilibrium. To assess the role of communication both treatments are additionally run with a "chat option," yielding four treatments in total. Our results show that subjects frequently reject the formation of partial cartels in the modified treatments. In all treatments with communication subjects are more likely to form complete cartels than partial cartels. The implications of these results are important for antitrust: payoff asymmetries between cartel members and outsiders may jeopardize the formation of partial cartels. Yet complete cartels may be formed instead, if institutional mechanisms with frequent communication are used to form cartels.
Subjects: 
Communication
Coordination
Experiment
Partial cartels
JEL: 
C92
D02
L41
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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