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Institutional Authority and Collusion

Lookup NU author(s): Professor Daniel ZizzoORCiD

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Abstract

A ‘collusion puzzle’ exists by which, even though increasing the number of firms reduces the ability to tacitly collude, and leads to a collapse in collusion in experimental markets with three or more firms, in natural markets there are such numbers of firms colluding successfully. We present an experiment showing that, if managers are deferential towards an authority, firms can induce more collusion by delegating production decisions to middle managers and providing suitable informal nudges. This holds not only with two but also with four firms. We are also able to distinguish compliance effects from coordination effects.

Publication metadata

Author(s): Sonntag A, Zizzo DJ

Publication type: Article

Publication status: Published

Journal: Southern Economic Journal

Year: 2015

Volume: 82

Issue: 1

Pages: 13-37

Print publication date: 01/07/2015

Online publication date: 23/03/2015

Acceptance date: 01/09/2014

Date deposited: 03/02/2015

ISSN (print): 0038-4038

ISSN (electronic): 2325-8012

Publisher: Southern Economic Association

URL: http://dx.doi.org/10.1002/soej.12065

DOI: 10.1002/soej.12065

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