Abstract
We demonstrate with a grim trigger strategy that the small firm should be more willing to collude tacitly as its market share declines; large firms should be less willing to cooperate. The small firm is not a maverick. The intensity of rivalry between two firms with asymmetric market shares is studied in experimental markets. Treatments give duopolists (1) 50% shares, (2) a 60 or 40% share, and (3) an 80 or 20% share. Choices for the small firm in the latter treatments are not significantly larger than the collusive choice. Irrespective of relative size, firms in all three market environments exhibit collusive behavior.
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Phillips, O.R., Menkhaus, D.J. & Thurow, J.N. The Small Firm in a Quantity Choosing Game: Some Experimental Evidence. Rev Ind Organ 38, 191–207 (2011). https://doi.org/10.1007/s11151-011-9277-9
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DOI: https://doi.org/10.1007/s11151-011-9277-9