publication-status: Acceptedtypes: ArticlePre-print draft published as working paper by Düsseldorf Institute for Competition Economics (DICE). NOTICE: this is the author’s version of a work that was accepted for publication in European Economic Review. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Economic Review, Elsevier, vol. 56(8), 2012, DOI: 10.1016/j.euroecorev.2012.09.002We explore the difference between explicit and tacit collusion by investigating the
impact communication has in experimental markets. For Bertrand oligopolies with
various numbers of firms, we compare pricing behavior with and without the possibility
to communicate among firms. We find strong evidence that talking helps to obtain
higher pro fits for any number of firms, however, the gain from communicating is nonmonotonic
in the number of firms, with medium-sized industries having the largest
additional profi t from talking. We also find that industries continue to collude successfully
after communication is disabled. Communication supports firms in coordinating
on collusive pricing schemes, and it is also used for conflict mediation.Financial support from Deutsche Forschungsgemeinschaft (DFG) is gratefully acknowledge
