Gomez-Martinez, F., Onderstal, S., and Sonnemans, J. (2016). Firm-specific information and explicit collusion in experimental oligopolies. European Economic Review, 82:132-141.
JournalEuropean Economic Review
We experimentally study the effect of information about competitors’ actions on cartel stability and firms’ incentives to form cartels in Cournot markets. As in previous experiments, markets become very competitive when individualized information is available and participants cannot communicate. In contrast, when communication is possible, results reverse: Markets become less competitive and cartels become more stable when individualized information is available. We also observe that the extra profits that firms obtain thanks to the possibility to communicate are higher when individualized information is present, suggesting that firms have greater incentives to form cartels in that situation.