Tuesday, October 5, 2010
Posted by D. Daniel Sokol
Dan Kovenock (University of Iowa), Florian Morath (Max Planck Institute of Intellectual Property, Competition and Tax Law), and Johannes Münster (Free University of Berlin) address Information sharing in contests.
ABSTRACT: We study the incentives to share private information ahead of contests, such as markets with promotional competition, procurement contests, or R&D. We consider the cases where firms have (i) independent values and (ii) common values of winning the contest. In both cases, when decisions to share information are made independently, sharing information is strictly dominated. With independent values, an industry-wide agreement to share information can arise in equilbrium. Expected effort is lower with than without information sharing. With common values, an industry-wide agreement to share information never arises in equilibrium. Expected effort is higher with than without information sharing.