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2 - Experimental results on collusion

Published online by Cambridge University Press:  04 December 2009

By
Marco A. Haan ,
Schoonbeek Lambert  and
Barbara M. Winkel
Edited by
Jeroen Hinloopen
Afterword by
Hans-Theo Normann
Jeroen Hinloopen
Affiliation:
Universiteit van Amsterdam
Hans-Theo Normann
Affiliation:
Royal Holloway, University of London
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Summary

We review the experimental literature on collusion, focusing in particular on the role of information. We confront the results with the theoretical literature and discuss the policy implications. The main insights from the experimental literature are the following. In the standard environment, firms have little success in achieving collusion. The only mildly collusive results are achieved when just two firms are active. Evidence on the effect of increasing the amount of available information on the likelihood of collusion is mixed. Voluntary information sharing has some collusive effect, even though collusion is not the main reason that firms choose to do so. The availability of the history of an industry's past prices seems to have some effect on the ability to collude.

Introduction

Collusion is a major issue in competition policy. One important objective of competition authorities is to prevent firms that are supposed to compete against each other from achieving prices that are higher than the prices that would result from free and fair competition. Another important objective is to track down and punish those firms that do engage in price- or quantity-fixing agreements.

It is not easy to achieve these goals, especially in a world in which competition authorities have only limited funds at their disposal, and need to make choices with respect to the firms and industries they investigate. Many important yet difficult questions have to be answered.

Type
Chapter
Information
Experiments and Competition Policy , pp. 9 - 33
Publisher: Cambridge University Press
Print publication year: 2009

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