Institutional Authority and Collusion

Sonntag, AxelORCID: and Zizzo, Daniel John (2015) Institutional Authority and Collusion. Southern Economic Journal, 82 (1), pp. 13-37.

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A “collusion puzzle” exists by which, even though increasing the number of firms reduces the ability to tacitly collude, and leads to a collapse in collusion in experimental markets with three or more firms, in natural markets there are such numbers of firms colluding successfully. We present an experiment showing that, if managers are deferential toward an authority, firms can induce more collusion by delegating production decisions to middle managers and providing suitable informal nudges. This holds not only with two but also with four firms. We are also able to distinguish compliance effects from coordination effects. (Author's abstract)

Item Type: Article in Academic Journal
Keywords: Collusion, Cournot, oligopoly, authority, delegation, coordination
Classification Codes (e.g. JEL): JEL L13, L22, C91
Research Units: Former Research Units (until 2020) > Insight Austria
Date Deposited: 17 Jan 2018 13:16
Last Modified: 09 Jan 2019 12:33
DOI: 10.1002/soej.12065
ISSN: 2325-8012

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