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Institutional authority and collusion

Author

Listed:
  • Axel Sonntag
  • Daniel John Zizzo

Abstract

A “collusion puzzle” exists by which, even though increasing the number of firms reduces the ability to tacitly collude, and leads to a collapse in collusion in experimental markets with three or more firms, in natural markets there are such numbers of firms colluding successfully. We present an experiment showing that, if managers are deferential toward an authority, firms can induce more collusion by delegating production decisions to middle managers and providing suitable informal nudges. This holds not only with two but also with four firms. We are also able to distinguish compliance effects from coordination effects.

Suggested Citation

  • Axel Sonntag & Daniel John Zizzo, 2015. "Institutional authority and collusion," Southern Economic Journal, John Wiley & Sons, vol. 82(1), pages 13-37, July.
    • Handle: RePEc:wly:soecon:v:82:y:2015:i:1:p:13-37
    DOI: 10.1002/soej.12065
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    Cited by:

    1. Vittorio Pelligra & Tommaso Reggiani & Daniel John Zizzo, 2020. "Responding to (un)reasonable requests by an authority," Theory and Decision, Springer, vol. 89(3), pages 287-311, October.
    2. V. Pelligra & T. Reggiani & D.J. Zizzo, 2016. "Responding to (Un)Reasonable Requests," Working Paper CRENoS 201614, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    3. Björn Vollan & Karla Henning & Deniza Staewa, 2017. "Do campaigns featuring impact evaluations increase donations? Evidence from a survey experiment," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 9(4), pages 500-518, October.
    4. Cicognani, Simona & Romagnoli, Giorgia & Soraperra, Ivan, 2024. "Fostering trust: When the rhetoric of sharing can backfire," Journal of Economic Psychology, Elsevier, vol. 102(C).

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    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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