Pricing Frequency Restrictions Curb the Initiation of Collusion
Speaker: Prof Ralph Bayer
Affiliation: Adelaide University
Location: Room 210, Chamberlain Building (#35), St Lucia Campus
Zoom: https://uqz.zoom.us/j/82603079317
Abstract: We experimentally test the impact of pricing-frequency restrictions on the price level in a 60 minute, real-time duopoly market. Our unregulated market allows for price changes at any time. We compare this to a real-time market where currently chosen prices are implemented at fixed intervals. Average price levels are significantly lower with price-frequency restrictions. With the help of two additional treatments, we rule out the size of strategic risk, and the decreased possibility of communicating through prices, as drivers of lower price levels in the restricted markets. Instead, discrete pricing periods reduce the ability to successfully initiate collusion by making it harder to establish common knowledge of the mutual willingness to collude.
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