Working Papers,
Lund University, Department of Economics

Abstract: This paper explores experimentally the effects of costly communication possibilities in market entry games. It is shown that these effects depend on whether entry costs are symmetric or asymmetric. In the former, but not the latter case, communication possibilities increase coordination success substantially and are likely to generate inferior outcomes for consumers. Furthermore, cost asymmetries provide a tacit coordination cue that is robust to changes in the game and is used by experienced players as a substitute to communication. It is also shown that although communication opens up for aggressive market domination strategies, such strategies are not used often successful.

Keywords: Communication; Market Entry; Coordination

JEL-codes: C72; C91; D43; K21; L41

47 pages, May 3, 2006

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Published as

Ola Andersson and Håkan Holm, (2010), 'Endogenous Communication and Tacit Coordination in Market Entry Games - An explorative experimental study', International Journal of Industrial Organization, vol 28, pages 477-495

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