The Small Firm in a Quantity Choosing Game: Some Experimental Evidence

The Small Firm in a Quantity Choosing Game: Some Experimental Evidence We demonstrate with a grim trigger strategy that the small firm should be more willing to collude tacitly as its market share declines; large firms should be less willing to cooperate. The small firm is not a maverick. The intensity of rivalry between two firms with asymmetric market shares is studied in experimental markets. Treatments give duopolists (1) 50% shares, (2) a 60 or 40% share, and (3) an 80 or 20% share. Choices for the small firm in the latter treatments are not significantly larger than the collusive choice. Irrespective of relative size, firms in all three market environments exhibit collusive behavior. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

The Small Firm in a Quantity Choosing Game: Some Experimental Evidence

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Publisher
Springer Journals
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-011-9277-9
Publisher site
See Article on Publisher Site

Abstract

We demonstrate with a grim trigger strategy that the small firm should be more willing to collude tacitly as its market share declines; large firms should be less willing to cooperate. The small firm is not a maverick. The intensity of rivalry between two firms with asymmetric market shares is studied in experimental markets. Treatments give duopolists (1) 50% shares, (2) a 60 or 40% share, and (3) an 80 or 20% share. Choices for the small firm in the latter treatments are not significantly larger than the collusive choice. Irrespective of relative size, firms in all three market environments exhibit collusive behavior.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Feb 11, 2011

References

  • Empirical approaches for identifying maverick firms: An application to mortgage providers in Australia
    Breunig, R.; Menezes, F.

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