Thursday, July 21, 2016

Strategy Revision Opportunities and Collusion

Matthew Embrey (University of Sussex) ; Friederike Mengel (University of Essex and Maastricht University) and Ronald Peeters (Maastricht University) theorize Strategy Revision Opportunities and Collusion.


This paper studies whether and how strategy revision opportunities affect levels of collusion in indefinitely repeated two-player games. Consistent with standard theory, we find that such opportunities do not affect strategy choices, or collusion levels, if the game is of strategic substitutes. In contrast, there is a strong and positive effect for games of strategic complements. Revision opportunities lead to more collusion. The latter cannot be explained by renegotiation or standard risk-dominance considerations, but is consistent with a notion of fear of miscoordination based on minmax regret.

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