Industry structure and collusion with uniform yardstick competition: Theory and experiments

Dijkstra, Pieter U.; Haan, Marco; Mulder, Machiel

doi:10.1016/j.ijindorg.2016.10.001

Cited by 14 publications

(7 citation statements)

References 35 publications

(44 reference statements)

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“…In an infinitely repeated game context additional subgame perfect Nash equilibria which may support prices above the equilibrium price of the stage game can be rationalized. In Appendix A(v), we therefore compare the critical discount factor = Defect − JPM Defect − Nash (Friedman [1971]) across the treatments (see, e.g., Dijkstra et al [2017], for a similar approach). This analysis supports the notion that tacit collusion is harder to sustain with more firms, and that this relationship is strictly monotonic, both for Bertrand and Cournot treatments.…”

Section: Iii(i) Experimental Designmentioning

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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Section: Iii(i) Experimental Designmentioning

confidence: 99%

Number Effects and Tacit Collusion in Experimental Oligopolies

Horstmann

Krämer

Schnurr

2018

The J Industrial Economics

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“…It emphasizes the coordinated development of population, resources, environment and ecology, economy and society from the industrial level [4]. Scientific and rational industrial structure is the prerequisite of sustainable development [5].…”

Section: Introductionmentioning

confidence: 99%

Industry Interdependence Dynamics and Structure Change Causal Analysis: An Empirical Study on China’s Shipbuilding Industry

2017

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Based on empirical evidence from Yangtze River Delta, Pearl River Delta and Circum-Bohai-Sea region, this study applies the Input-Output (I-O) model and ArcGIS to analyze the interdependence and its dynamic evolution of the shipbuilding industry. In order to study the change cause of shipbuilding industrial structure, we decompose the I-O model to obtain the influential factors including domestic final demand, overseas export demand, intermediate input, intermediate demand import and final demand import. The results indicate that (1) the shipbuilding industry has a significant interdependence, which has showed the characteristics of high integration and interaction. Among the three different regions, the degree of interdependence of the Yangtze River Delta is most significant, followed by the Pearl River Delta and the Circum-Bohai region. (2) The interaction and integration of the shipbuilding industry have the trend of synchronous development. From the initial S-shapes of coastal distribution, the interaction gradually expands to inland cities radially. (3) The dependence of the shipbuilding industry has reduced but the self-supporting effect continuously strengthened, and industrialization is accelerating, which indicates the shipbuilding industry will further promote the optimization of industrial structure. (4) Shipbuilding industry has been expanding a lot, the main causes of changes in industrial structure are different, and the effect of intermediate inputs change plays a significant role in the Yangtze River Delta. In the Pearl River Delta, it is the changes effect of foreign export demand that counts. However, it is the effect of the final demand that makes contribution to the industrial structure change in Circum-Bohai-Sea region.

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“…Yet, this effect is only shown for equally-sized firms, raising the question whether a more heterogeneous firm-size distribution would give the same result. From Dijkstra, Haan, and Mulder (2014), we know that the incentive to collude in case of a weighted uniform yardstick is related to the industry structure: in more heterogeneous industries, firms appear to collude less than in homogeneous industries.…”

Section: Introductionmentioning

confidence: 99%

“…In our experiment we let agents decide upon cost levels while they know that their output prices are set by a regulator using a specific form of yardstick competition. This design of the experiment is similar to Dijkstra et al (2014). We use a simple model, loosely based on Shleifer (1985), where firms have to exert costly effort to lower their costs.…”

Section: Introductionmentioning

confidence: 99%

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Design of yardstick competition and consumer prices: Experimental evidence

Dijkstra

Haan²,

Mulder³

2017

Energy Economics

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In this paper we analyze the effect of the design of yardstick competition on consumer prices, by means of a theoretical analysis as well as an economic experiment. We compare four different designs: the uniform yardstick, the unweighted uniform yardstick, the discriminatory yardstick, and the best-practice yardstick. The effect of a specific design on prices depends on two separate mechanisms, one which affects the incentive power to increase productive efficiency and another which affects the risk of collusion. We show theoretically that for the best-practice yardstick these two mechanisms point in the same direction (high prices), which is confirmed by the experiment. The theoretical analysis also shows that the discriminatory yardstick results in lower prices than the unweighted uniform yardstick, which is also confirmed by the economic experiment. The theory, however, does not give a clear answer on the relative performance of the discriminatory versus the uniform yardstick. In the experimental analysis, we find that the advantage of the discriminatory yardstick in terms of giving incentives to improve productive efficiency exceeds the disadvantage of a relatively higher risk of collusion. This conclusion appears to be robust for different degrees of heterogeneity of the industry. Hence the discriminatory yardstick yields the lowest prices for consumers.

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Industry structure and collusion with uniform yardstick competition: Theory and experiments

Cited by 14 publications

References 35 publications

Number Effects and Tacit Collusion in Experimental Oligopolies

Number Effects and Tacit Collusion in Experimental Oligopolies

Industry Interdependence Dynamics and Structure Change Causal Analysis: An Empirical Study on China’s Shipbuilding Industry

Design of yardstick competition and consumer prices: Experimental evidence

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