Equilibrium Models of Tacit Collusion in Oligopoly Experiments with Price-Setting Firms

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Equilibrium Models of Tacit Collusion in Oligopoly Experiments with Price-Setting Firms

Published Date

1980-10

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Center for Economic Research, Department of Economics, University of Minnesota

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Working Paper

Abstract

In a noncooperative oligopoly with price-setting firms, tacit collusion is present when prices and profits exceed the "competitive" levels determined by a Nash equilibrium in prices. Such tacit collusion has been observed in oligopoly experiments with product differentiation. This paper discusses several equilibrium models of tacitly collusive behavior, including a "consistent conjectures equilibrium" which was recently proposed by Bresnahan (1980). The payoff parameters for some previously reported oligopoly experiments are used to compute the price predictions for alternative equilibrium theories. The consistent conjectures equilibrium provides the best explanation of the pattern of reported price averages.

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Previously Published Citation

Holt, C.A. Jr., (1980), "Equilibrium Models of Tacit Collusion in Oligopoly Experiments with Price-Setting Firms", Discussion Paper No. 138, Center for Economic Research, Department of Economics, University of Minnesota.

Suggested citation

Holt, Charles A. Jr.. (1980). Equilibrium Models of Tacit Collusion in Oligopoly Experiments with Price-Setting Firms. Retrieved from the University Digital Conservancy, https://hdl.handle.net/11299/55043.

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