Internal Conflict, Market Uniformity, and Transparency in Price Competition between Teams

28 Pages Posted: 10 Dec 2016

See all articles by Michael J. Kurschilgen

Michael J. Kurschilgen

Technical University Munich; Max Planck Institute for Collective Goods

Alexander Morell

Goethe University Frankfurt - Faculty of Law

Ori Weisel

University of Nottingham; Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics

Date Written: November 2016

Abstract

The way profits are divided within successful teams imposes different degrees of internal conflict. We experimentally examine how the level of internal conflict, and whether such conflict is transparent to other teams, affects teams' ability to compete vis-à-vis each other, and, consequently, market outcomes. Participants took part in a repeated Bertrand duopoly game between three-player teams which had either the same or different level of internal conflict (uniform vs. mixed). Profit division was either private-pay (high conflict; each member received her own asking price) or equal-pay (low conflict; profits were divided equally). We find that internal conflict leads to (tacit) coordination on high prices in uniform private-pay duopolies, but places private-pay teams at a competitive disadvantage in mixed duopolies. Competition is softened by transparency in uniform markets, but intensified in mixed markets. We propose an explanation of the results and discuss implications for managers and policy makers.

Keywords: Organizations, Conflict, Sharing Rules, Competition, Heterogeneity, Transparency, Experiment

JEL Classification: D43, L22, C92

Suggested Citation

Kurschilgen, Michael J. and Morell, Alexander and Weisel, Ori, Internal Conflict, Market Uniformity, and Transparency in Price Competition between Teams (November 2016). MPI Collective Goods Preprint, No. 2016/18, Available at SSRN: https://ssrn.com/abstract=2882680 or http://dx.doi.org/10.2139/ssrn.2882680

Michael J. Kurschilgen

Technical University Munich ( email )

Arcisstr. 21
München, 80333
Germany

HOME PAGE: http://https://www.mecon.wi.tum.de/index.php?id=28

Max Planck Institute for Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

HOME PAGE: http://www.coll.mpg.de/team/page/michael_kurschilgen

Alexander Morell (Contact Author)

Goethe University Frankfurt - Faculty of Law ( email )

Frankfurt
Germany

Ori Weisel

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

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