Institutional Authority and Collusion

Author(s)
Axel Sonntag, Daniel John Zizzo
Abstract

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 towards 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.

Organisation(s)
Department of Economics
External organisation(s)
Newcastle University
Journal
Southern Economic Journal
Volume
82
Pages
13-37
No. of pages
25
ISSN
0038-4038
Publication date
07-2015
Peer reviewed
Yes
Austrian Fields of Science 2012
502013 Industrial economics
Keywords
Portal url
https://ucris.univie.ac.at/portal/en/publications/institutional-authority-and-collusion(dcabf24f-e28c-4ae0-a644-919fdcb1c8f8).html