Abstract. In asymmetric Cournot duopolies without side payments, maximizing joint profits is implausible, firms disagree on the collusive price, and production is necessarily inefficient. We investigate experimentally how firms collude (implicitly and explicitly), if at all, in such markets. When explicit communication is available, joint profits increase above the static Nash level, but nearly all the gains from talking go to the inefficient firm. Bargaining solutions do not satisfactorily predict collusive outcomes. When given the choice to talk, the duopolies only rarely agree to chat, foremost because the efficient firms often decline that option. When the role of the efficient firm is earned in a contest, the efficient firm earns higher profits and firms often collude by producing equal amounts. Confirming previous results, our data also show that, without communication, firms fail to collude and essentially play the static Nash equilibrium.
Forthcoming, In: Kohler, Wilhelm; Yalcin, Erdal (ed.): New Developments in Global Sourcing - Cambridge: MIT Press, 2018
Abstract. In this paper, we consider a dynamic search-and-matching problem of a firm with its intermediate input supplier. In our model, a headquarter currently matched with a supplier, has an interest to find and collaborate with a more efficient partner. However, supplier switching through search and re-matching is costly. Given this trade-off between the fixed costs and the expected gains from continued search, the process will stop whenever the headquarter has found a sufficiently efficient supplier. Using firm-product-level data of fresh Chinese exporters to the United States, we obtain empirical evidence in line with the predictions of our theory. In particular, we find that the share of short-term collaborations is higher in industries with more supplier-cost dispersion, an indication of higher expected search opportunities.
Current work in progress:
Payment Contracts and Trade Finance in Export Relationships