IDEAS home Printed from https://ideas.repec.org/p/zbw/wzbmbh/301157.html
   My bibliography  Save this paper

Concerns about rising prices may raise prices

Author

Listed:
  • Huck, Steffen
  • Normann, Hans-Theo
  • Petros, Fidel

Abstract

We use a laboratory experiment to investigate whether statements from a governmental institution expressing concerns about price increases trigger such increases by facilitating tacit collusion. Such statements on market conduct are disclosed after an exogenous and unexpected upward cost shock. The two potential channels affecting tacit collusion work through (i) a reduction of strategic uncertainty and (ii) an inducement of correlated beliefs. We find that issued statements of concern become a self-fulfilling prophecy, triggering price increases, and that a reduction in strategic uncertainty drives this adverse effect. Our results suggest that institutions should refrain from publishing such statements of concern

Suggested Citation

  • Huck, Steffen & Normann, Hans-Theo & Petros, Fidel, 2024. "Concerns about rising prices may raise prices," Discussion Papers, Research Unit: Market Behavior SP II 2024-203, WZB Berlin Social Science Center.
  • Handle: RePEc:zbw:wzbmbh:301157
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/301157/1/1898781958.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Fonseca, Miguel A. & Normann, Hans-Theo, 2012. "Explicit vs. tacit collusion—The impact of communication in oligopoly experiments," European Economic Review, Elsevier, vol. 56(8), pages 1759-1772.
    2. Daniel Friedman & Ryan Oprea, 2012. "A Continuous Dilemma," American Economic Review, American Economic Association, vol. 102(1), pages 337-363, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Maria Bigoni & Jan Potters & Giancarlo Spagnolo, 2019. "Frequency of interaction, communication and collusion: an experiment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 68(4), pages 827-844, November.
    2. Matthew Embrey & Friederike Mengel & Ronald Peeters, 2019. "Strategy revision opportunities and collusion," Experimental Economics, Springer;Economic Science Association, vol. 22(4), pages 834-856, December.
    3. M. Djiguemde & D. Dubois & A. Sauquet & M. Tidball, 2022. "Continuous Versus Discrete Time in Dynamic Common Pool Resource Game Experiments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(4), pages 985-1014, August.
    4. Embrey, Matthew & Seel, Christian & Philipp Reiss, J., 2024. "Gambling in risk-taking contests: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 221(C), pages 570-585.
    5. Yaroslav Rosokha & Chen Wei, 2024. "Cooperation in Queueing Systems," Management Science, INFORMS, vol. 70(11), pages 7597-7616, November.
    6. Werner Güth & Manfred Stadler & Alexandra Zaby, 2020. "Capacity precommitment, communication, and collusive pricing: theoretical benchmark and experimental evidence," International Journal of Game Theory, Springer;Game Theory Society, vol. 49(2), pages 495-524, June.
    7. Luke Garrod & Matthew Olczak, 2017. "Collusion Under Imperfect Monitoring with Asymmetric Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 65(3), pages 654-682, September.
    8. Feltovich, Nick & Grossman, Philip J., 2015. "How does the effect of pre-play suggestions vary with group size? Experimental evidence from a threshold public-good game," European Economic Review, Elsevier, vol. 79(C), pages 263-280.
    9. Stephen Davies & Peter L. Ormosi, 2014. "The economic impact of cartels and anti-cartel enforcement," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2013-07v2, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    10. Chen, Gang & Rytter, Niels G.M. & Jiang, Liping & Nielsen, Peter & Jensen, Lars, 2017. "Pre-announcements of price increase intentions in liner shipping spot markets," Transportation Research Part A: Policy and Practice, Elsevier, vol. 95(C), pages 109-125.
    11. Justus Haucap & Christina Heldman, 2023. "On the sociology of cartels," European Journal of Law and Economics, Springer, vol. 56(2), pages 289-323, October.
    12. Kyung Hwan Baik & Subhasish M. Chowdhury & Abhijit Ramalingam, 2021. "Group size and matching protocol in contests," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(4), pages 1716-1736, November.
    13. Choi, S. & Goyal, G. & Moisan, F., 2020. "Large Scale Experiments on Networks: A New Platform with Applications," Cambridge Working Papers in Economics 2063, Faculty of Economics, University of Cambridge.
    14. Doğan, Gönül, 2018. "Collusion in a buyer–seller network formation game," Journal of Economic Behavior & Organization, Elsevier, vol. 155(C), pages 445-457.
    15. Chowdhury, Subhasish M. & Crede, Carsten J., 2020. "Post-cartel tacit collusion: Determinants, consequences, and prevention," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    16. Haoran He & Yefeng Chen, 2021. "Auction mechanisms for allocating subsidies for carbon emissions reduction: an experimental investigation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 57(2), pages 387-430, August.
    17. Haucap, Justus & Heldman, Christina & Rau, Holger A., 2024. "Gender and cooperation in the presence of negative externalities," Games and Economic Behavior, Elsevier, vol. 147(C), pages 148-169.
    18. Miguel A. Fonseca & Yan Li & Hans‐Theo Normann, 2018. "Why factors facilitating collusion may not predict cartel occurrence — experimental evidence," Southern Economic Journal, John Wiley & Sons, vol. 85(1), pages 255-275, July.
    19. Pablo Hernandez-Lagos & Dylan Minor & Dana Sisak, 2017. "Do people who care about others cooperate more? Experimental evidence from relative incentive pay," Experimental Economics, Springer;Economic Science Association, vol. 20(4), pages 809-835, December.
    20. 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.

    More about this item

    Keywords

    beliefs; coordination device; strategic uncertainty; tacit collusion;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:wzbmbh:301157. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/vawzbde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.