Common Ownership and Firm Strategic Behaviour – Endogenous Ownership & Strategic Uncertainty

Last registered on November 08, 2022

Pre-Trial

Trial Information

General Information

Title
Common Ownership and Firm Strategic Behaviour – Endogenous Ownership & Strategic Uncertainty
RCT ID
AEARCTR-0010354
Initial registration date
November 03, 2022

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
November 08, 2022, 4:24 PM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Region

Primary Investigator

Affiliation

Other Primary Investigator(s)

Additional Trial Information

Status
In development
Start date
2022-11-06
End date
2022-12-31
Secondary IDs
Prior work
This trial is based on or builds upon one or more prior RCTs.
Abstract
We study the production decisions of managers in an experimental Cournot market as a function of the ownership structure of the experimental firms. This trial is related to previous trials (AEARCTR-0006817, AEARCTR-0008810 & AEARCTR-0010265).

In our experiment, there are two firms, managed by two managers and owned by two shareholders. Managers choose production quantities. The price in the market depends on the total production of both firms. Subjects play the experiment for multiple rounds.
Shareholders initially own 100% of one of the firms each (divided ownership). During the experiment, they have the option to exchange half of their shares so that they each own 50% of both firms. The shareholders incentives change with the ownership. If they each own shares in only one firm, they are best off when their manager produces the Cournot duopoly quantity. If they each own shares in both firms, they are best of when their manager produces halve of the monopoly quantity. Overall shareholder profits are higher if both managers produce half of the monopoly quantity than if both produce the Cournot duopoly quantity.

One of the questions we studied in Trial AEARCTR-0008810, was whether shareholders choose to diversify in order to bring themselves into a position where they can benefit from setting anticompetitive incentives. We found that this rarely happens. One potential explanation is the strategic uncertainty created by the fact that managers may not respond to incentives as expected. In this trial we explore this hypothesis by replacing human managers with computer controlled managers who always make the optimal choice given their incentives.
External Link(s)

Registration Citation

Citation
Frey, Jonas. 2022. "Common Ownership and Firm Strategic Behaviour – Endogenous Ownership & Strategic Uncertainty." AEA RCT Registry. November 08. https://doi.org/10.1257/rct.10354-1.0
Experimental Details

Interventions

Intervention(s)
This trial consists of only one treatment, which we will compare to results from the other trials listed in the description of this trial. The intervention is to replace human managers with computer-controlled managers who always maximise their profit, given their incentives. This treatment is an extension of the treatments run as part of AEARCTR-0008810. We will use data from this previous trial as control group.
Intervention (Hidden)
Intervention Start Date
2022-11-06
Intervention End Date
2022-12-31

Primary Outcomes

Primary Outcomes (end points)
The primary outcome is the choice of sharehodlers to swap shares in roder to become diversified.
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
In our experiment, there are two firms, managed by two managers and owned by two shareholders. Managers choose production quantities. The price in the market depends on the total production of both firms. Subjects play the experiment for multiple rounds.
Shareholders initially own 100% of one of the firms each (divided ownership). During the experiment, they have the option to exchange half of their shares so that they each own 50% of both firms. The shareholders incentives change with the ownership. If they each own shares in only one firm, they are best off when their manager produces the Cournot duopoly quantity. If they each own shares in both firms, they are best of when their manager produces halve of the monopoly quantity. Overall shareholder profits are higher if both managers produce half of the monopoly quantity than if both produce the Cournot duopoly quantity.
Experimental Design Details
Randomization Method
Since this trial extends 2 existing treatments run as part of AEARCTR-0008810. The randomisation comes from the time at which participants are recruited into the trial. Subejcts recruietet in the first wave done es part of AEARCTR-0008810 are the control and subjects recruited in the second wave which we plan to recruit now are the treatment.
Randomization Unit
The randomisation unit is the experimental session as we will compare sessions from this trial to sessions from previous trials.
Was the treatment clustered?
Yes

Experiment Characteristics

Sample size: planned number of clusters
4 sessions of 50 people each
Sample size: planned number of observations
200 New observations in addition to the 400 existing observations collected as part of AEARCTR-0008810.
Sample size (or number of clusters) by treatment arms
200
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
IRB

Institutional Review Boards (IRBs)

IRB Name
Saïd Business School Departmental Research Ethics Committee
IRB Approval Date
2020-03-09
IRB Approval Number
SSH_SBS_C1A_20_04

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
No
Data Collection Complete
Data Publication

Data Publication

Is public data available?
No

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Reports & Other Materials