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An Experimental Examination of Market Concentration and Capacity Effects on Price Competition

Author

Listed:
  • Ewing Bradley T.

    (Texas Tech University)

  • Kruse Jamie B

    (East Carolina University and National Oceanic Atmospheric Administration)

Abstract

This research examines the comparative impact of market concentration and excess capacity on the performance of posted-offer experimental markets. We report the results of panel data analysis of 35 markets with or without excess capacity involving two, three, or four sellers. We find that sellers can sustain higher prices in more concentrated laboratory markets. Higher levels of excess capacity lead to lower laboratory market prices supporting the notion that excess capacity reduces the ability of firms to collude as opposed to the view that excess capacity is a trigger strategy punishment that sustains collusion.

Suggested Citation

  • Ewing Bradley T. & Kruse Jamie B, 2010. "An Experimental Examination of Market Concentration and Capacity Effects on Price Competition," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 5(1), pages 1-16, April.
    • Handle: RePEc:bpj:jbvela:v:5:y:2010:i:1:n:3
    DOI: 10.2202/1932-9156.1093
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    References listed on IDEAS

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    Cited by:

    1. Jan Potters & Sigrid Suetens, 2013. "Oligopoly Experiments In The Current Millennium," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 439-460, July.

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