*The authors thank the editor, three anonymous referees, Pedro Rey and Aurora García Gallego for helpful comments, and the Spanish Ministry of Education and Science (SEC2002-01352) and the Barcelona Economics Program of CREA for financial support.
COLLUSION AND FIGHTS IN AN EXPERIMENT WITH PRICE-SETTING FIRMS AND ADVANCE PRODUCTION*
Article first published online: 10 SEP 2007
The Journal of Industrial Economics
Volume 55, Issue 3, pages 453–473, September 2007
How to Cite
BRANDTS, J. and GUILLEN, P. (2007), COLLUSION AND FIGHTS IN AN EXPERIMENT WITH PRICE-SETTING FIRMS AND ADVANCE PRODUCTION. The Journal of Industrial Economics, 55: 453–473. doi: 10.1111/j.1467-6451.2007.00319.x
- Issue published online: 10 SEP 2007
- Article first published online: 10 SEP 2007
We present results from 50-round duopoly and triopoly experiments. Firms decide repeatedly both on price and quantity of a perishable good. Each firm has capacity to serve the whole market. The stage game does not have an equilibrium in pure strategies. Most markets evolve either to monopolies as a consequence of bankruptcies or to collusion at the monopolistic price. Evolution is faster in markets with two than in those with three firms. Therefore, over time average price is lower with three than with two. Consumer surplus is higher with three firms, but efficiency is lower in markets with three firms.