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Field
Paper Abstract
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Before
Despite its empirical relevance, increasing returns to scale are understudied in experimental markets. We use Bertrand duopolies with increasing returns to examine the effects of two sharing rules on prices and collusive behavior: the symmetric rule (where each of the two firms that set the same price serves half of the market demand) and the winner-takes-all rule (where a fair randomization device decides which of the two firms serves the entire market). We hypothesized that market prices would be higher under the winner-takes-all rule because it provides a collusion mechanism that the symmetric rule does not. While we find that subjects under the winner-takes-all rule, as predicted, coordinate more than twice as often on one price compared to the symmetric sharing rule, we do not find that this increases market prices. This might be driven by the problem that subjects do not sufficiently coordinate on high prices. We report findings on alternation (an alternative collusion strategy) and intertemporal price adjustments in further analyses.
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After
Despite their empirical relevance, increasing returns to scale are understudied in experimental markets. We use Bertrand duopolies with increasing returns to examine the effects of two sharing rules on collusive behavior and prices in a pre-registered experiment: the symmetric rule (where each of the two firms that set the same price serves half of the market demand) and the winner-takes-all rule (where a fair randomization device decides which of the two firms serves the entire market). We hypothesized that market prices would be higher under the winner-takes-all rule because it provides a collusion mechanism that the symmetric rule does not. While we find that subjects under the winner-takes-all rule coordinate more often on one price than the symmetric sharing rule, this does not increase market prices. Coordination on high prices is rare. Additionally, the winner-takes-all rule facilitates the subjects’ ability to coordinate on equal prices after sharing a market in the previous period.
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Paper Citation
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Before
Andreas Orland (2022): "Sharing Rules in Bertrand Oligopolies with Increasing Returns," SSRN
Working Paper 4273943.
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After
Andreas Orland (2025): "Sharing Rules in Bertrand Oligopolies with Increasing Returns," Journal of
Economic Behavior & Organization, 233, 106968.
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