Institutional Authority and Collusion

Axel Sonntag, Daniel John Zizzo

Research output: Contribution to journalArticle

6 Citations (Scopus)
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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.
Original languageEnglish
Pages (from-to)13-37
JournalSouthern Economic Journal
Volume82
Issue number1
Early online date23 Mar 2015
DOIs
Publication statusPublished - Jul 2015

Keywords

  • Collusion
  • Cournot
  • oligopoly
  • authority
  • delegation
  • coordination

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