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Number Effects and Tacit Collusion in Experimental Oligopolies

Author

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  • Niklas Horstmann
  • Jan Krämer
  • Daniel Schnurr

Abstract

We systematically investigate the relationship between the number of firms in a market and tacit collusion by means of a meta‐analysis of the literature on oligopoly experiments as well as two of our own experiments with a total of 368 participants. We show that the degree of tacit collusion decreases strictly with the number of competitors in industries with two, three and four firms. Although previous literature could not affirm that triopolies are more collusive than quadropolies, we provide evidence for this fact for symmetric and asymmetric firms under Bertrand and Cournot competition.

Suggested Citation

  • Niklas Horstmann & Jan Krämer & Daniel Schnurr, 2018. "Number Effects and Tacit Collusion in Experimental Oligopolies," Journal of Industrial Economics, Wiley Blackwell, vol. 66(3), pages 650-700, September.
    • Handle: RePEc:bla:jindec:v:66:y:2018:i:3:p:650-700
    DOI: 10.1111/joie.12181
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    Cited by:

    1. Hans-Theo Normann & Martin Sternberg, 2021. "Human-Algorithm Interaction: Algorithmic Pricing in Hybrid Laboratory Markets," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2021_11, Max Planck Institute for Research on Collective Goods, revised 13 Apr 2022.
    2. Donja Darai & Catherine Roux & Frédéric Schneider, 2019. "Mergers, mavericks, and tacit collusion," Working Papers 201902, Cambridge Judge Business School, University of Cambridge.
    3. Bulutay, Muhammed & Hales, David & Julius, Patrick & Tasch, Weiwei, 2021. "Imperfect tacit collusion and asymmetric price transmission," Journal of Economic Behavior & Organization, Elsevier, vol. 192(C), pages 584-599.
    4. Aleksandar B. Todorov, 2022. "Algorithmic pricing and concerted behaviour – competitive challenges?," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 90-107.
    5. Jasmina Arifovic & Liang Dia & Nobuyuki Hanaki, 2023. "An individual evolutionary learning model meets Cournot," ISER Discussion Paper 1200, Institute of Social and Economic Research, Osaka University.
    6. Werner, Tobias, 2021. "Algorithmic and human collusion," DICE Discussion Papers 372, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    7. Nobuyuki Hanaki & Aidas Masiliunas, 2021. "Market Concentration and Incentives to Collude in Cournot Oligopoly Experiments," ISER Discussion Paper 1131, Institute of Social and Economic Research, Osaka University.
    8. Emanuel Vespa & Taylor Weidman & Alistair J. Wilson, 2021. "Testing Models of Strategic Uncertainty: Equilibrium Selection in Repeated Games," Papers 2101.05900, arXiv.org.
    9. Juan Luis Jiménez & Manuel Ojeda-Cabral & José Manuel Ordóñez-de-Haro, 2023. "Who Blows the Whistle on Cartels? Finding the Leniency Applicant at the European Commission," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(2), pages 123-153, September.
    10. Rose Neng Lai & Lawrence Hoc Nang Fong, 2021. "Development Strategies in a Market of High Vacancies and Sticky Rates – The Case of the Hotel Industry," International Real Estate Review, Global Social Science Institute, vol. 24(3), pages 363-383.
    11. Normann, Hans-Theo & Sternberg, Martin, 2022. "Human-algorithm interaction: Algorithmic pricing in hybrid laboratory markets," DICE Discussion Papers 392, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    12. Waichman, Israel & Blanckenburg, Korbinian von, 2020. "Is there no “I” in “Team”? Interindividual-intergroup discontinuity effect in a Cournot competition experiment," Journal of Economic Psychology, Elsevier, vol. 77(C).
    13. Meickmann, Felix C., 2023. "Cooperation in knowledge sharing and R&D investment," Journal of Economic Behavior & Organization, Elsevier, vol. 211(C), pages 146-164.
    14. Olatunji Abdul Shobande & Mobolaji Daniel Akinbomi, 2020. "Competition dynamics in Nigerian aviation industry: a game theoretic approach," Future Business Journal, Springer, vol. 6(1), pages 1-8, December.
    15. Normann, Hans-Theo & Sternberg, Martin, 2023. "Human-algorithm interaction: Algorithmic pricing in hybrid laboratory markets," European Economic Review, Elsevier, vol. 152(C).

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