Pricing Behavior of Cartel Outsiders in Incomplete Cartels

We analyze the pricing behavior of cartel outsiders when a partial cartel has formed in an experimental market.Using a repeated asymmetric capacityconstraint price game, we enable the two largest firms to communicate via chat to facilitate the formation of a partial cartel.Supporting common theory, we find that a partial cartel is sufficient to distort and increase market prices in general.However, in contrast to theory, we find that prices of insiders and outsiders in incomplete cartelised markets are not necessarily on the same level.Our data indicate that this particular market outcome depends greatly on the cartel's pricing strategy.