Collusion through price ceilings? In search of a focal-point effect

We resume the search for a collusive focal-point effect of price ceilings in laboratory markets. We argue that market conditions in previous studies were unfavorable for collusion which may have been responsible for not finding such a focal-point effect. Our design aims at maximizing the likelihood of a focal-point effect. Nevertheless, our results again fail to support the focal-point hypothesis. Collusion is as unlikely in markets with a price ceiling as in markets with unconstrained pricing. Overall, static Nash equilibrium predicts the data fairly accurately. We argue this might warrant re-interpretation of field studies on anti-competitive effects of price ceilings.

Research highlights► We resume the search for a focal-point effect of price ceilings in lab markets. ► Our design aims at maximizing the likelihood of a collusive focal-point effect. ► Nevertheless, our results again fail to support the focal-point hypothesis. ► Collusion is as unlikely in markets with as in markets without a price ceiling. ► This is in contrast to field studies on anti-competitive effects of price ceilings.