Non-binding signals: are they effective or ineffectual?

Amy Moore () and Michael Taylor ()
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Amy Moore: Southern Utah University
Michael Taylor: University of Notre Dame

Economics Bulletin, 2008, vol. 3, issue 53, 1-11

Abstract: Companies often send non-binding messages to their competitors, to consumers, to channel members and to various other recipients. When such messages are in the form of price signals, they tend to make antitrust authorities uneasy since it is widely believed that price signaling can and does serve as a collusion facilitating mechanism. We conducted experimental posted-offer markets with multiple competitive equilibria, and found that contrary to expectations, markets in which sellers could engage in cheap talk had lower contract prices than markets without cheap talk opportunities.

Keywords: posted-offer; markets (search for similar items in EconPapers)
JEL-codes: C9 (search for similar items in EconPapers)
Date: 2008-08-31
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