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Price dynamics and collusion under short-run price commitments

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  • Leufkens, K.

    (Microeconomics & Public Economics)

  • Peeters, R.J.A.P.

    (Microeconomics & Public Economics)

Abstract

We consider a dynamic homogeneous oligopoly in which firms set prices repeatedly. Theory predicts that short-run price commitments increase profits and may lead to less price stability. The experiments that we conducted provide support for the first effect and against the second effect when a random ending rule is applied. When a fixed ending rule is applied, we find no significant impact of short-run price commitments on profits and price stability.
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  • Leufkens, K. & Peeters, R.J.A.P., 2008. "Price dynamics and collusion under short-run price commitments," Research Memorandum 052, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    • Handle: RePEc:unm:umamet:2008052
    DOI: 10.26481/umamet.2008052
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    Cited by:

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    2. Gonzalo Ballestero, 2022. "Collusion and Artificial Intelligence: A Computational Experiment with Sequential Pricing Algorithms under Stochastic Costs," Working Papers 118, Red Nacional de Investigadores en Economía (RedNIE).
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    4. Emilio Calvano & Giacomo Calzolari & Vincenzo Denicolò & Sergio Pastorello, 2020. "Artificial Intelligence, Algorithmic Pricing, and Collusion," American Economic Review, American Economic Association, vol. 110(10), pages 3267-3297, October.
    5. Gonzalo Ballestero, 2021. "Collusion and Artificial Intelligence: A computational experiment with sequential pricing algorithms under stochastic costs," Young Researchers Working Papers 1, Universidad de San Andres, Departamento de Economia, revised Oct 2022.
    6. Gonzalo Ballestero, 2021. "Collusion and Artificial Intelligence: A computational experiment with sequential pricing algorithms under stochastic costs," Asociación Argentina de Economía Política: Working Papers 4433, Asociación Argentina de Economía Política.
    7. Philippe Gillen & Alexander Rasch & Achim Wambach & Peter Werner, 2016. "Bid pooling in reverse multi-unit Dutch auctions: an experimental investigation," Theory and Decision, Springer, vol. 81(4), pages 511-534, November.
    8. Charalambos Christou, 2015. "A model of dynamic competition with sticky prices," Discussion Paper Series 2015_05, Department of Economics, University of Macedonia, revised Nov 2015.
    9. Jan Potters & Sigrid Suetens, 2013. "Oligopoly Experiments In The Current Millennium," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 439-460, July.
    10. Aghadadashli, Hamid, 2020. "Let’s Collude," CEPR Discussion Papers 15241, C.E.P.R. Discussion Papers.

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