Munich Personal RePEc Archive

Entry in Collusive Markets: An Experimental Study

Goppelsroeder, Marie (2009): Entry in Collusive Markets: An Experimental Study.

[img]
Preview
PDF
MPRA_paper_14707.pdf

Download (1108Kb) | Preview

Abstract

In this paper we present an experiment in which we test the effects of sequential entry on the stability of collusion in oligopoly markets. Theoretical as well as experimental research suggests that a larger number of firms in an industry makes collusion harder to sustain. In this study, we explore to what extent collusion can be upheld with exogenous entry when groups start off small and when it is common knowledge that the entrant is informed about the history of her group prior to entry. We find that collusion is indeed easier to sustain in the latter case than in groups starting large. We conjecture that an implicit coordination problem is resolved more easily in a smaller group and that coordination, once it has been established, can be transferred to the enlarged group by means of a common code of conduct. Moreover, the results suggest that entrants emulate the behavior of their group upon entry.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.