Tuesday, December 21, 2010
Posted by D. Daniel Sokol
Juan José Ganuza (Universitat Pompeu Fabra, Department of Economics and Business) and Jos Jansen (Max Planck Institute for Research on Collective Goods) discuss Too Much Information Sharing? Welfare Effects of Sharing Acquired Cost Information in Oligopoly.
ABSTRACT: By using general information structures and precision criteria based on the dispersion of conditional expectations, we study how oligopolists’ information acquisition decisions may change the effects of information sharing on the consumer surplus. Sharing information about individual cost parameters gives the following trade-off in Cournot oligopoly. On the one hand, it decreases the expected consumer surplus for a given information precision, as the literature shows. On the other hand, information sharing increases the firms’ incentives to acquire information, and the consumer surplus increases in the precision of the firms’ information. Interestingly, the latter effect may dominate the former effect.