How much you talk matters: cheap talk and collusion in a Bertrand oligopoly game

This study investigates the impact of cheap talk on price and participant profits using a repeated Bertrand oligopoly experiment. During the first 10 rounds, participants are not allowed to communicate with each other. Twenty additional rounds are then played in which the participants can text with one another using an instant message system. Some groups are allowed to text before every round, some before every other round, some every third round, some every fourth round, and others only every fifth round. On average, when texting is allowed, groups attempt to collude to raise the price after being allowed to text. In summary, success in collusion with cheap talk is correlated with a combination of how often participants can text, the subject of their texts, and whether participants actually text when they can.