Publicado como un capítulo en: Jeroen Hinloopen (ed.). Experiments and Competition Policy. [S.l.]: Cambridge University Press, 2009, p.34-60. ISBN 9780511576201. ISBN 9781107403611. DOI http://dx.doi.org/10.1017/CBO9780511576201.003
We study collusive behaviour in experimental duopolies that compete in prices under dynamic demand conditions. In one treatment the demand grows at a constant rate. In the other treatment the demand declines at another constant rate. The rates are chosen so that the evolution of the demand in one case is just the reverse in time than the one for the other case. We use a box-design demand function so that there are no issues of finding and co-ordinating on the collusive price. Contrary to game-theoretic reasoning, our results show that collusion is significantly larger when the demand shrinks than when it grows. We conjecture that the prospect of rapidly declining profit opportunities exerts a disciplining effect on firms that facilitates collusion and discourages deviation.
Financial support from the Spanish Ministerio de Ciencia y Tecnologia (BEC 2003-00412), the Ministerio de Educación y Cultura (PB98-0465), the Barcelona Economics programme CREA, the British Academy and the University of Nottingham is gratefully acknowledged.