Collusion through price ceilings? In search of a focal-point effect

D. Engelmann, W. Müller

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We resume the search for a collusive focal-point effect of price ceilings in laboratory markets. We argue that market conditions in previous studies were unfavorable for collusion which may have been responsible for not finding such a focal-point effect. Our design aims at maximizing the likelihood of a focal-point effect. Nevertheless, our results again fail to support the focal-point hypothesis. Collusion is as unlikely in markets with a price ceiling as in markets with unconstrained pricing. Overall, static Nash equilibrium predicts the data fairly accurately. We argue this might warrant re-interpretation of field studies on anti-competitive effects of price ceilings.
Original languageEnglish
Pages (from-to)291-302
JournalJournal of Economic Behavior and Organization
Volume79
Issue number3
DOIs
Publication statusPublished - 2011

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Price ceiling
Collusion
Résumé
Nash equilibrium
Field study
Competitive effect
Warrants
Market conditions
Pricing

Cite this

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title = "Collusion through price ceilings? In search of a focal-point effect",
abstract = "We resume the search for a collusive focal-point effect of price ceilings in laboratory markets. We argue that market conditions in previous studies were unfavorable for collusion which may have been responsible for not finding such a focal-point effect. Our design aims at maximizing the likelihood of a focal-point effect. Nevertheless, our results again fail to support the focal-point hypothesis. Collusion is as unlikely in markets with a price ceiling as in markets with unconstrained pricing. Overall, static Nash equilibrium predicts the data fairly accurately. We argue this might warrant re-interpretation of field studies on anti-competitive effects of price ceilings.",
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Collusion through price ceilings? In search of a focal-point effect. / Engelmann, D.; Müller, W.

In: Journal of Economic Behavior and Organization, Vol. 79, No. 3, 2011, p. 291-302.

Research output: Contribution to journalArticleScientificpeer-review

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AU - Müller, W.

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DO - 10.1016/j.jebo.2011.02.008

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JO - Journal of Economic Behavior & Organization

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