Cournot Oligopoly with Information Sharing

Li, Lode

doi:10.2307/2555510

Cited by 326 publications

(209 citation statements)

References 6 publications

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“…Second, all stable networks involve some amount of information sharing, provided both signals' correlation and the number of players are not too small. This is in striking contrast with traditional conclusions about information sharing in Cournot oligopolies, where market competition is found incompatible with sharing unless goods are strongly differentiated (that is, unless strategies are weakly substitutes or complements -see seminal works by Novshek and Sonnenschein, 1982, Vives, 1985, Kirby, 1988, Li, 1995. The intuition behind the result of proposition 7 is as follows: even when the game is one of strategic substitutes, still two agents may have incentives to share their own information if this provides them with a substantial refinement about opponents' behaviour.…”

Section: Information Sharing With Correlated Signalscontrasting

confidence: 82%

Information sharing networks in linear quadratic games

Currarini

Feri

2014

Int J Game Theory

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We study the bilateral exchange of information in the context of linear quadratic games. An information structure is here represented by a non directed network, whose nodes are agents and whose links represent sharing agreements. We first study the equilibrium use of information in any given sharing network, finding that the extent to which a piece of information is "public" affects the equilibrium use of it, in line with previous results in the literature. We then study the incentives to share information ex-ante, highlighting the role of the elasticity of payoffs to the equilibrium volatility of one's own strategy and of one's opponents' strategies. For the case of uncorrelated signals we fully characterize pairwise stable networks for the general linear quadratic game. For the case of correlated signals, we study pairwise stable networks for three specific linear quadratic games -Cournot oligopoly, Keynes' beauty contest and Public good provision -in which strategies are substitute, complement and orthogonal, respectively. We show that signals' correlation favors the transmission of information, but may also prevent all information form being transmitted.

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Section: Information Sharing With Correlated Signalscontrasting

confidence: 82%

Information sharing networks in linear quadratic games

Currarini

Feri

2014

Int J Game Theory

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“…The classic literature in this area demonstrates the difficulties of inducing competing oligopolists to share private information (cf. Novshek and Sonnenschein 1982;Vives 1984;Gal-Or 1985Li 1985;Shapiro 1986;Raith 1996;Jin 2000), and potential ways to address this issue (e.g., Ziv 1993, Jain et al 2010. One of the primary conclusions derived from this literature is that when competing firms have private information on a common uncertain variable, they do not want to share this information with their competitors.…”

Section: Literature Reviewmentioning

confidence: 99%

Do Firms Invest in Forecasting Efficiently? The Effect of Competition on Demand Forecast Investments and Supply Chain Coordination

Shin

Tunca

2010

Operations Research

160

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We study the effect of downstream competition on incentives for demand forecast investments in supply chains. We show that with common pricing schemes, such as wholesale price or two-part tariffs, downstream firms under Cournot competition overinvest in demand forecasting. Analyzing the determinants of overinvestment, we demonstrate that under wholesale price contracts and two-part tariffs, total demand forecast investment can be very significant, and as a result, the supply chain can suffer substantial losses. We show that an increased number of competing retailers and uncertainty in consumer demand tend to increase inefficiency, whereas increased consumer market size and demand forecast costs reduce the loss in supply chain surplus. We identify the causes of inefficiency, and to coordinate the channel with forecast investments, we explore contracts in the general class of market-based contracts used in practice. When retailers' forecast investments are not observable, such a contract that employs an index-price can fully coordinate the supply chain. When forecast investments are observable to others, however, the retailers engage in an "arms race" for forecast investment, which can result in a significant increase in overinvestment and reduction in supply chain surplus. Furthermore, in that case, simple market-based contracts cannot coordinate the supply chain. To solve this problem, we propose a uniform-price divisiblegood auction-based contracting scheme, which can achieve full coordination when forecast investments are observable. We also demonstrate the desirable properties for implementability of our proposed coordinating contracting schemes, including incentive-compatible and reliable demand forecast information revelation by the retailers, and being regret-free.

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“…Accordingly, we build our model on the literature on information sharing in oligopoly. Important contributions to this literature are made by Novshek and Sonnenschein (1982), Clarke (1983), Vives (1984), Gal-Or (1985, 1986), Li (1985, Shapiro (1986) and Raith (1996). These papers concentrate on a¯rm's incentives to share its private information with competing¯rms, but they do not consider mergers.…”

Section: Introductionmentioning

confidence: 99%