Risk Aversion and Tacit Collusion in a Bertrand Duopoly Experiment

Risk Aversion and Tacit Collusion in a Bertrand Duopoly Experiment Recent research has found significant differences in the ability of subjects tacitly to collude, depending on the nature of the strategic interaction (e.g., Cournot vs. Bertrand or substitutes vs. complements goods). We investigate the relationship between subject-specific risk tolerance and tacit collusion in Bertrand duopoly experiments. We find that less risk-averse subjects price higher than do their more risk-averse counterparts, but this relationship is only significant when actions are strategic substitutes. When we analyze pair-level data, we find that non-risk averse subject pairs price significantly higher than do risk averse and mixed pairs in both the substitutes and complements treatments. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Risk Aversion and Tacit Collusion in a Bertrand Duopoly Experiment

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Springer US
Copyright © 2012 by Springer Science+Business Media, LLC.
Economics; Industrial Organization; Microeconomics
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