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| Robert Feinberg and Christopher Snyder |
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| ''Collusion with secret price cuts: an experimental investigation'' |
| ( 2002, Vol. 3 No.6 ) |
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| Theoretical work starting with Stigler (1964) suggests that collusion may be difficult to sustain in a repeated game with secret price cuts and demand uncertainty. Compared to equilibria in games of perfect information, trigger-strategy equilibria in this context result in lower payoffs because punishments occur along the equilibrium path. We tested the theory in a series of economic experiments. Consistent with the theory, treatments with imperfect information were less collusive than treatments with perfect information. However, in the imperfect-information treatments, players seemed to settle on the static Nash outcome rather than using trigger strategies. Players did resort to punishments for undercutting in perfect-information treatments, and this sometimes led to successful collusion afterward. |
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| Keywords: |
JEL: C9 - Design of Experiments: General
L1 - Market Structure, Firm Strategy, and Market Performance: General |
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| Manuscript Received : Feb 02 2002 | | Manuscript Accepted : Mar 28 2002 |
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