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Information sharing in oligopoly. (English) Zbl 0578.90008
This paper examines an oligopolistic market where firms face uncertain demand for their product. Each firm observes a private signal on the state of demand and decides whether to reveal this signal to other firms and how complete this revelation will be. After the stage of information transmission the firms choose their level of output. Symmetric pure strategy Nash equilibria are derived and it is shown that no information sharing is the unique symmetric, subgame perfect equilibrium regardless of the degree of correlation among the private signals of the firms.
More specifically, a two-stage game is presented. In stage one each firm reports to an outside agency whether its private information should be transmitted to other firms and how accurate this transmission should be. The agency reports the messages in accordance with the requests of the firms. In the second stage each firm chooses its level of output given the vector of observations available after stage one. This vector consists of the private signal of the given firm and its accuracy and the messages reported by the agency and their accuracies. Pure strategy Nash equilibria which are subgame perfect and symmetric are derived. In such an equilibrium all firms choose the same level of accuracy for reporting private information and use the same decision rules for determining output. Incentives for revealing information are investigated when different firms’ private signals range from being totally uncorrelated to perfectly correlated. In all cases it is shown that no information sharing is the unique symmetric Nash equilibrium of the game.
Related papers include R. Clarke, ”Collusion and incentives for information sharing” [Bell Journal of Economics 14, 383-394 (1983)] and W. Novshek and H. Sonnenschein, ”Fulfilled expectations Cournot duopoly with information acquisition and release” [ibid. 13, 214- 218 (1982)]. The present paper differs from the above in that it allows firms to have a continuum of partial revelation strategies and allows various degrees of initial correlation among private signals. These features are obtained at the cost of assuming a particular functional form for random variables and looking only at symmetric equilibria.
Reviewer: D.Kovenock

MSC:
91B24 Microeconomic theory (price theory and economic markets)
91A40 Other game-theoretic models
91B50 General equilibrium theory
91A80 Applications of game theory
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