What encourages price-fixing between companies? An economic experiment.
Do we as consumers pay too much for coffee, petrol, magazines, beer or sugar? How do “too high” prices come about?
The goal of companies is to make as high a profit as possible. They might invest in their product quality or launch a new product to attract as many consumers as possible. This often involves high costs and uncertainty. Alternatively, they can escape competitive pressure by agreeing on an inflated price with their competitors. However, by doing so, they not only cause considerable economic damage but may also violate applicable competition law. In Germany, the Federal Cartel Office is responsible for detecting and investigating cartels. Last year alone, it imposed fines of 850 million euros for violations.
Restriction of competition can take many different forms; this research project will focus on coordination at a high price.
Several factors can be relevant:
- How many competitors are there?
- How big is the hurdle to enter the market as a new company?
- How well can competitors observe each other’s pricing decisions?
- Do competitors compete with each other repeatedly, do they know each other personally?
- Do they have the opportunity to exchange ideas in person (for example, at industry meetings)?
- How are cartels uncovered and punished?
- Is there, as in Germany, a leniency program?
In this research project, you can address this or a similar question. After working out the research question, I would be happy to advise you on the design, implementation and evaluation of an economic experiment.