Price dynamics and collusion under short-run price commitments |
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Authors: | Kasper LeufkensRonald Peeters |
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Institution: | Department of Economics, Maastricht University, P.O. Box 616, 6200 MD Maastricht, The Netherlands |
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Abstract: | We consider a dynamic homogeneous oligopoly in which firms set prices repeatedly. Theory predicts that short-run price commitments increase profits and may lead to less price stability. The experiments that we conducted provide support for the first effect and against the second effect when a random ending rule is applied. When a fixed ending rule is applied, we find no significant impact of short-run price commitments on profits and price stability. |
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Keywords: | C91 D43 |
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