Abstract
This paper investigates pricing in laboratory markets when human players interact with an algorithm. We compare the degree of competition when exclusively humans interact to the case of one firm delegating its decisions to an algorithm. We further vary whether participants know about the presence of the algorithm. When one of three firms in a market is an algorithm, we observe significantly higher prices compared to humanonly markets. Firms employing an algorithm earn significantly less profit than their rivals. For four-firm markets, we find no significant differences. (Un)certainty about the actual presence of an algorithm does not significantly affect collusion, although humans seem to perceive algorithms as more disruptive.
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