Communication in Cournot competition: An experimental study

Waichman, Israel; Requate, Till; Siang, Ch'ng Kean

doi:10.1016/j.joep.2014.02.005

Cited by 22 publications

(14 citation statements)

References 29 publications

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“…Our results from the CT and CT-PI treatments confirm the cooperation-enhancing effect of cheap talk in earlier oligopoly literature (e.g Waichman et al 2014). and show that this effect can be present also when the players have a commitment asymmetry, i.e.…”

supporting

confidence: 89%

“…Many experiments find that cheap talk increases cooperation and coordination (see also the reviews of Crawford 1998 andBalliet 2010). In repeated Cournot duopoly and oligopoly experiments cheap talk price announcements (Cason 1995;Fonseca and Normann 2012) and cheap talk quantity announcements (Waichman et al 2014) increase cooperation. Some repeated (Müller 2006) and one-shot (Roy 2012) Cournot duopoly experiments also show that the opportunity to revise initially announced quantities does not lead to more competitive results.…”

Section: Related Literaturementioning

confidence: 99%

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Cheap talk and cooperation in Stackelberg games

Hämäläinen

Leppänen

2016

Cent Eur J Oper Res

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Previous literature on cheap talk suggests that it is used to increase cooperation. We study cheap talk and the effect of the leader's private payoff information in new repeated Stackelberg game settings. Our results confirm earlier studies that the players cooperate in repeated Stackelberg games with complete payoff information. In the cheap talk setting the follower has the actual first mover advantage and should in theory benefit from it, but we find that many followers cooperate instead. Similarly, many leaders do not use cheap talk for cheating but commit to symmetric jointoptimum quantities. The leader's private payoff information results in a low frequency of cooperation but in the presence of cheap talk players do cooperate.

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supporting

confidence: 89%

Section: Related Literaturementioning

confidence: 99%

Cheap talk and cooperation in Stackelberg games

Hämäläinen

Leppänen

2016

Cent Eur J Oper Res

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“…Most oligopoly experiments implement one of the two workhorse models in industrial organization: price competition à la Bertrand (Fouraker and Siegel [1963]; Dolbear et al [1968]; Dufwenberg and Gneezy [2000]; Orzen [2008]; Davis [2009]; Fonseca and Normann [2012]) or quantity competition à la Cournot (Fouraker and Siegel [1963]; Bosch-Domènech and Vriend [2003]; Huck et al [2004]; Waichman et al [2014]). 3 A third strand of literature observes tacit collusion in posted-offer markets, i.e., simultaneous competition in prices and quantities (Ketcham et al [1984]; Alger [1987]; Brandts and Guillén [2007]; Ewing and Kruse [2010]).…”

Section: Ii(i) Experimental Designsmentioning

confidence: 99%

“…First, we note that the Friedman index, which is suggested to assess the likelihood of tacit collusion, predicts poorly if correlated with φ Nash (ρ = 0.213, p = 0.330), but is positively and significantly correlated with φ Walras (ρ = 0.593, p = 0.003). Second, in order to control for potential dependencies between treatments from the same study, i.e., different base levels of tacit collusion between experimental settings, the following three-level linear random-intercept model is estimated: 8 The following treatments reported in Table II are not considered in this step of the inter-study analysis: Incomplete information (Fouraker and Siegel [1963]), Random matching (Orzen [2008]), Hard and Hardest (Bosch-Domènech and Vriend [2003]), and DMNC/TMNC in which participants are managers instead of students (Waichman et al [2014]). Fouraker and Siegel [1963]), and ξ s is the error component shared between observations from the same study.…”

mentioning

confidence: 99%

Number Effects and Tacit Collusion in Experimental Oligopolies

Horstmann

Krämer

Schnurr

2018

The J Industrial Economics

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We systematically investigate the relationship between the number of firms in a market and tacit collusion by means of a meta-analysis of the literature on oligopoly experiments as well as two of our own experiments with a total of 368 participants. We show that the degree of tacit collusion decreases strictly with the number of competitors in industries with two, three and four firms. Although previous literature could not affirm that triopolies are more collusive than quadropolies, we provide evidence for this fact for symmetric and asymmetric firms under Bertrand and Cournot competition. † Authors' affiliations:

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“…All experiments were programmed using the z-Tree software provided by Fischbacher (2007) and conducted in the experimental laboratory of the Ostwestfalen-Lippe University of Applied Sciences in Lemgo, Germany. Fonseca and Normann (2012) and Waichman et al (2014) demonstrate that this holds for Bertrand as well as Cournot competition. We review the impact of communication in our first hypotheses.…”

Section: Resultsmentioning

confidence: 82%

Subject pool effects in price competition games: students versus professionals

Beyer

Tebbe

Blanckenburg

et al. 2018

Applied Economics Letters

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Questioning the external validity of experiments that rely on student participants is an evergreen in experimental economics. Yet, there is ambiguous evidence of potential subject-pool bias. We add to the subject-pool debate by enlarging the set of experiments for which subject-pool differences have been studied. In a duopolistic Bertrand market setup designed to test for collu-sive behavior, we test two treatments. The first i s a b aseline t reatment, w here p articipants cannot communicate with each other, the second is a communication treatment in which participants are allowed to communicate. Each treatment is first conducted with students and then replicated with professionals. Our results show that student subjects and professionals differ significantly. However, these differences manifest themselves in quantitative rather than qualitative terms. Professionals do collude more, but their behavioral difference between treatments is similar. Students are thus a valid surrogate, if the research question is qualitative, but results generated by student samples should be handled with caution, if quantitative differences matter.

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Communication in Cournot competition: An experimental study

Cited by 22 publications

References 29 publications

Cheap talk and cooperation in Stackelberg games

Cheap talk and cooperation in Stackelberg games

Number Effects and Tacit Collusion in Experimental Oligopolies

Subject pool effects in price competition games: students versus professionals

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