Experimental Economics

, Volume 13, Issue 1, pp 45–65 | Cite as

Cooperation without coordination: signaling, types and tacit collusion in laboratory oligopolies

Article

Abstract

We study the effects of price signaling activity and underlying propensities to cooperate on tacit collusion in posted offer markets. The primary experiment consists of an extensively repeated baseline sequence and a ‘forecast’ sequence that adds to the baseline a forecasting game that allows identification of signaling intentions. Forecast sequence results indicate that signaling intentions differ considerably from those that are counted under a standard signal measure based on previous period prices. Nevertheless, we find essentially no correlation between either measure of signal volumes and collusive efficiency. A second experiment demonstrates that underlying seller propensities to cooperate more clearly affect collusiveness.

Keywords

Experiments Tacit collusion Price signaling Types 

JEL Classification

C9 L11 L13 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Supplementary material

10683_2009_9228_MOESM1_ESM.doc (358 kb)
Experiment Instructions (DOC 358 KB)
10683_2009_9228_MOESM2_ESM.doc (162 kb)
Appendix (DOC 163 KB)

References

  1. Baker, J. (2002). Mavericks, mergers and exclusion: proving coordinated competitive effects under the antitrust laws. New York University Law Review, 77, 135–203. Google Scholar
  2. Borenstein, S. (2004). Rapid price communication and coordination: The Airline Tariff Publishing case (1994). In J. Kowka & L. White (Eds.), The antitrust revolution: economics, competition and policy (4th ed., pp. 233–251). New York: Oxford University Press. Google Scholar
  3. Burlando, R. M., & Guala, F. (2005). Heterogeneous agents in public goods experiments. Experimental Economics, 8, 35–54. CrossRefGoogle Scholar
  4. Cason, T. N. (1995). Cheap talk price signaling in laboratory markets. Information Economics and Policy, 7, 183–204. CrossRefGoogle Scholar
  5. Cason, T. N., & Davis, D. D. (1995). Price communications in a multi-market context: an experimental investigation. Review of Industrial Organization, 10, 769–787. CrossRefGoogle Scholar
  6. Cason, T., & Williams, A. W. (1990). Competitive equilibrium convergence in a posted-offer markets with extreme earnings inequities. Journal of Economic Behavior and Organization, 14, 331–352. CrossRefGoogle Scholar
  7. Croson, R. (2000). Thinking like a game theorist: factors affecting the frequency of equilibrium play. Journal of Economic Behavior and Organization, 41, 299–314. CrossRefGoogle Scholar
  8. Davis, D. D., & Holt, C. A. (1994). Market power and mergers in laboratory markets with posted prices. RAND Journal of Economics, 25, 467–487. CrossRefGoogle Scholar
  9. Davis, D. D., & Korenok, O. (2009). Posted-offer markets in near continuous time: an experimental investigation. Economic Inquiry, 47, 446–466. CrossRefGoogle Scholar
  10. Davis, D. D., & Wilson, B. J. (2000). Cost savings and market power exercise. Economic Theory, 16, 545–565. Google Scholar
  11. Durham, Y., McCabe, K., Olson, M. A., Rassenti, S., & Smith, V. (2004). Oligopoly competition in fixed cost environments. International Journal of Industrial Organization, 22, 147–162. CrossRefGoogle Scholar
  12. Fischbacher, U., Gächter, S., & Fehr, E. (2001). Are people conditionally cooperative? Evidence from a public goods experiment. Economics Letters, 71, 397–404. CrossRefGoogle Scholar
  13. Fouraker, L. E., & Siegel, S. (1963). Bargaining behavior. New York: McGraw Hill. Google Scholar
  14. Green, E. J., & Porter, R. H. (1984). Noncooperative collusion under imperfect price information. Econometrica, 52, 87–100. CrossRefGoogle Scholar
  15. Gunnthorsdottir, A., Houser, D., & McCabe, K. (2007). Disposition, history and contributions in public goods experiments. Journal of Economic Behavior and Organization, 62, 304–315. CrossRefGoogle Scholar
  16. Haan, M. A., Schoonbeek, L., & Winkel, B. M. (2009). Experimental results on collusion. The role of information and communication. In J. Hinloopen & H. T. Normann (Eds.), Experiments and competition policies (pp. 9–34). Cambridge: Cambridge University Press. CrossRefGoogle Scholar
  17. Hoggatt, A. C. (1967). Measuring cooperativeness of behavior in quantity variation duopoly games. Behavioral Science, 12, 109–121. CrossRefGoogle Scholar
  18. Hoggatt, A. C. (1969). Response of paid students to differential behavior of robots in bifurcated duopoly games. Review of Economic Studies, 36, 417–432. CrossRefGoogle Scholar
  19. Holt, C. A., & Davis, D. D. (1990). The effects of non-binding price announcements on posted offer markets. Economics Letters, 34, 307–310. CrossRefGoogle Scholar
  20. Isaac, R. M., Ramey, V., & Williams, A. W. (1984). Market organization and conspiracies in restraint of trade. Journal of Economic Behavior and Organization, 5, 191–222. CrossRefGoogle Scholar
  21. Kurzban, R., & Houser, D. (2005). Experiments investigating cooperative types in humans: a complement to evolutionary theory and simulations. Proceedings of the National Academy of Science, 102, 1803–1807. CrossRefGoogle Scholar
  22. Offerman, T., Sonnemans, J., & Schram, A. (1996). Value orientations, expectations, and voluntary contributions in public goods. Economic Journal, 106, 817–845. CrossRefGoogle Scholar
  23. Potters, J., & Suetens, S. (2008). Strategic interaction, externalities and cooperation: experimental evidence. Working Paper, Tilburg University. Google Scholar
  24. Smith, V. L., & Williams, A. W. (1990). The boundaries of competitive price theory: convergence, expectations and transactions costs. In L. Green & J. Kagel (Eds.), Advances in behavioral economics (pp. 3–35). New York: Ablex Publishing. Google Scholar
  25. Smith, V. L., Suchanek, G. L., & Williams, A. W. (1988). Bubbles, crashes and endogenous expectations in experimental sport asset market. Econometrica, 56, 1119–1152. CrossRefGoogle Scholar
  26. United States Department of Justice and Federal Trade Commission (1997). Horizontal Merger Guidelines. Google Scholar
  27. Wilcox, N. T., & Feltovich, N. (2002). Thinking like a game theorist: comment. Working Paper, University of Houston. Google Scholar
  28. Williams, A. W. (1987). The formation of price forecasts in experimental markets. Journal of Money, Credit, and Banking, 19(1), 1–18. CrossRefGoogle Scholar

Copyright information

© Economic Science Association 2009

Authors and Affiliations

  1. 1.Virginia Commonwealth UniversityRichmondUSA

Personalised recommendations