Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Friday, June 18, 2021

Hybrid Collusion: Algorithmic Pricing in Human-Computer Laboratory Markets

Hybrid Collusion: Algorithmic Pricing in Human-Computer Laboratory Markets

 

Hans-Theo Normann

Heinrich Heine University Dusseldorf - Department of Economics; Max Planck Institute for Research on Collective Goods

Martin Sternberg

MPI for Research on Collective Goods, Bonn

Abstract

We investigate collusive pricing in laboratory markets when human players interact with an algorithm. We compare the degree of (tacit) collusion when exclusively humans interact to the case of one firm in the market delegating its decisions to an algorithm. We further vary whether participants know about the presence of the algorithm. We find that three-firm markets involving an algorithmic player are significantly more collusive than human-only markets. Firms employing an algorithm earn significantly less profit than their rivals. For four-firm markets, we find no significant differences. (Un)certainty about the actual presence of an algorithm does not significantly affect collusion.

https://lawprofessors.typepad.com/antitrustprof_blog/2021/06/hybrid-collusion-algorithmic-pricing-in-human-computer-laboratory-markets.html

| Permalink

Comments

Post a comment