How Much You Talk Matters: Cheap Talk and Collusion in a Bertrand Oligopoly Game

This study investigates the impact of cheap talk on price in a repeated Bertrand oligopoly experiment. Each participant plays 20 rounds. Participants are placed three-person bidding groups where lowest bid wins. During first 10 rounds, participants not allowed to communicate with each other. All converged zero-profit equilibrium periods. We then play another rounds can text one using an instant message system. Some were before every round, some other third fourth and only fifth round. When texting is allowed, attempt collude raise after being text, but who maintain higher converge over time joint-profit maximum period. Hence, effective when subjects continuously monitor or converse.