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.
Current work in progress:
Payment Contracts and Trade Finance in Export Relationships