Cournot Oligopoly with Information Sharing

This article examines the incentives for Cournot oligopolists to share information about a common parameter or about firm-specific parameters. We assume that the private information that firms receive has equal accuracy and obeys a linear conditional expectation property. We find that when the uncer...

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Bibliographic Details
Published in:The Rand journal of economics 1985-12, Vol.16 (4), p.521-536
Main Author: Li, Lode
Format: Article
Language:English
Subjects:
Cost functions
Costs
Demand
Duopolies
Economic models
Economic theory
Equilibrium
Information
Information sharing
Marginal costs
Market equilibrium
Mathematical analysis
Nash equilibrium
Oligopolies
Oligopoly
Private costs
Shared
Signals
Uniqueness
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Description
Summary:This article examines the incentives for Cournot oligopolists to share information about a common parameter or about firm-specific parameters. We assume that the private information that firms receive has equal accuracy and obeys a linear conditional expectation property. We find that when the uncertainty is about a firm-specific parameter, perfect revelation is the unique equilibrium. When the uncertainty is about a common parameter, no information sharing is the unique equilibrium. But the nonpooling equilibrium converges to the situation where the pooling strategies are adopted as the total amount of information increases. Hence, the efficiency is achieved in the competitive equilibrium as the number of firms becomes large.
ISSN:0741-6261
1756-2171
DOI:10.2307/2555510