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This article analyzes experimentally whether the degree of collusion for one dimension of duopolists’ interactions influences the degree of collusion for another dimension. More precisely, I will explore whether a high degree of collusion for advertisement expenditures facilitates tacit price collusion. Two environments are tested, in which the size of the spillover between advertising expenditures is varied. The results indicate that both degrees of collusion are correlated: a high degree of collusion on advertising functions as a signalling device triggering a significantly higher degree of price collusion by the opponent. Thus advertising expenditures seem to be a useful indicator for market regulators to detect non-competitive pricing.This article analyzes experimentally whether the degree of collusion for one dimension of duopolists’ interactions influences the degree of collusion for another dimension. More precisely, I will explore whether a high degree of collusion for advertisement expenditures facilitates tacit price collusion. Two environments are tested, in which the size of the spillover between advertising expenditures is varied. The results indicate that both degrees of collusion are correlated: a high degree of collusion on advertising functions as a signalling device triggering a significantly higher degree of price collusion by the opponent. Thus advertising expenditures seem to be a useful indicator for market regulators to detect non-competitive pricing.
