Determinants of Tacit Collusion in a Cournot Duopoly Experiment
Abstract
We contribute to a growing literature that examines the relationship between the nature of strategic interaction and collusive behavior. We present results from a repeated Cournot duopoly experiment with treatments in which quantity choices are either strategic complements or substitutes. The initial underlying demand function allows for direct comparison with previous work utilizing a Bertrand duopoly setting. We find some evidence of collusion in the substitutes treatment, but no collusion in the complements treatment. We study an additional substitutes treatment to control for the absolute slope of the reaction functions across treatments, where we again find evidence of collusive behavior. However, using an alternate demand function parameterization where the goods are less closely related, we find no evidence of collusive behavior in either the substitutes or the complements treatment.
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