Abstract
This study examines freeform non-binding communication and simplification as devices to facilitate cooperative outcomes using a fixed-price location choice duopoly in the spirit of Hotelling[Hotelling, H., 1929. Stability in competition, Economic Journal 39, 41–57]. We extend Brown-Kruse et al. [Brown-Kruse, J., Cronshaw, M.B., Schenk, D.J., 1993. Theory and experiments on spatial competition, Economic Inquiry 31(1), 139–165] which studied freeform communication for a uniform customer distribution. This work tests two more distributions that make collusion more or less risky. We also test a simple 2×2 model with similar Nash equilibrium predictions. When subjects cannot communicate, cooperation is easier to achieve and sustain in the 2×2 model. However, freeform communication is a robust facilitator of joint profit maximizing outcomes regardless of risk in cooperating.
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