Document Type

Article

Language

eng

Publication Date

7-2019

Publisher

Wiley

Source Publication

Economic Inquiry

Source ISSN

0095-2583

Abstract

This paper examines the relationship between product innovation and the success of price collusion using novel laboratory experiments. Average market prices in low innovation (LO) experiments are significantly higher than those in high innovation, but otherwise identical experiments. This price difference is attributed to LO experimental subjects' greater common market experience. The data illustrate how collusion can be perceived as the "only way to make it" in LO markets where product innovation is not a viable strategy for increasing profits. They suggest that product homogeneity can be a proximate cause, and product innovation an ultimate cause, of collusion.

Comments

Accepted version. Economic Inquiry, Vol. 57, No. 3 (July 2019): 1526-1546. DOI. © 2019 Wiley. Used with permission.

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