Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67981
Authors: 
Abbink, Klaus
Brandts, Jordi
Year of Publication: 
2005
Series/Report no.: 
CeDEx Discussion Paper, The University of Nottingham 2005-03
Abstract: 
We study collusive behaviour in experimental duopolies that compete in prices under dynamic demand conditions. In one treatment the demand grows at a constant rate. In the other treatment the demand declines at another constant rate. The rates are chosen so that the evolution of the demand in one case is just the reverse in time than the one for the other case. We use a box-design demand function so that there are no issues of finding and co-ordinating on the collusive price. Contrary to game-theoretic reasoning, our results show that collusion is significantly larger when the demand shrinks than when it grows. We conjecture that the prospect of rapidly declining profit opportunities exerts a disciplining effect on firms that facilitates collusion and discourages deviation.
Subjects: 
Laboratory experiments
industrial organisation
oligopoly
price competition
collusion
JEL: 
C90
C72
D43
D83
L13
Document Type: 
Working Paper

Files in This Item:
File
Size
285.24 kB





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