An experimental examination of market concentration and capacity effects on price competition

Bradley T. Ewing, Jamie B. Kruse

Research output: Contribution to journalArticle

6 Scopus citations

Abstract

This research examines the comparative impact of market concentration and excess capacity on the performance of posted-offer experimental markets. We report the results of panel data analysis of 35 markets with or without excess capacity involving two, three, or four sellers. We find that sellers can sustain higher prices in more concentrated laboratory markets. Higher levels of excess capacity lead to lower laboratory market prices supporting the notion that excess capacity reduces the ability of firms to collude as opposed to the view that excess capacity is a trigger strategy punishment that sustains collusion.

Original languageEnglish
Article number3
JournalJournal of Business Valuation and Economic Loss Analysis
Volume5
Issue number1
DOIs
StatePublished - Apr 21 2010

Keywords

  • Collusion
  • Excess capacity
  • Laboratory experiment
  • Market concentration
  • Merger guidelines

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