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Collusion and Fights in an Experiment with Price-Setting Firms and Production in Advance

AuthorsBrandts, Jordi ; Guillén, Pablo
Issue Date15-Jul-2004
SeriesUFAE and IAE Working Papers ; 618.04
AbstractWe present results from 50-round market experiments in which firms decide repeatedly both on price and quantity of a completely perishable good. Each firm has capacity to serve the whole market. The stage game does not have an equilibrium in pure strategies. We run experiments for markets with two and three identical firms. Firms tend to cooperate to avoid fights, but when they fight bankruptcies are rather frequent. On average, pricing behavior is closer to that for pure quantity than for pure price competition and price and efficiency levels are higher for two than for three firms. Consumer surplus increases with the number of firms, but unsold production leads to higher efficiency losses with more firms. Over time prices tend to the highest possible one for markets both with two and three firms.
DescriptionTrabajo publicado como artículo en Journal of Industrial Economics 55(3): 453-473 (2007).-- http://dx.doi.org/10.1111/j.1467-6451.2007.00319.x
Publisher version (URL)http://dx.doi.org/10.1111/j.1467-6451.2007.00319.x
Appears in Collections:(IAE) Informes y documentos de trabajo
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