Explicit and Implicit Price Agreements in the Oligopoly

  • Project period: 10/2012 - 09/2014
  • Funding: Deutsche Forschungsgemeinschaft (DFG)

A short description of the project

In competition policy the distinction between explicit and implicit price agreements is fundamental. Explicit agreements on prices (cartels) are illegal, while implicit agreements are legal and happen silently (without communication). In the competition theory, however, this distinction is largely irrelevant: explicit agreements are also not legally binding and it is theoretically very difficult to spot an effect through direct agreements.

The project aims to explore the differences between explicit and implicit price agreements in laboratory experiments. In economic experiments, the test persons make decisions in a networked computer lab (here: the prices of a company) mostly in a strategic context (here: in an oligopoly).

Firstly, the main aspect of the experiments will be to figure out when explicit agreements are particularly rewarding, while considering a variety of scenarios. The comparison of the company profits is very important for this approach, whether communication is possible (explicit agreement) or not (implicit agreement). Secondly, the operation modes of explicit and implicit agreements should be compared. And finally it is about to find out what is spoken in explicit agreements between the companies.


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