In a capacity-then-price-setting game we experimentally identify capacity precommitment, the possibility to communicate before price choices, and prior competition experience as crucial factors for collusive pricing. The theoretical analysis determines the capacity thresholds above which firms...

A firm may strategically decrease capacity to gain bargaining power over its suppliers. While traditional models of bargaining imply that the incentive to do so is minimal, I report results from a laboratory experiment that suggest the existence of incentives to decrease capacity quite...

Focusing on sellers’ pricing decisions and the ensuing seller-buyer interactions, we report an experiment on dynamic pricing with scarcity in the form of capacity constraints. Rational expectations equilibrium solutions are constructed and then tested experimentally with subjects assigned the...