Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Thursday, September 22, 2011

Exchange of private demand information by simultaneous signaling

Posted by D. Daniel Sokol

Manfred Stadler (University of Tubingen, Department of Economics) has written on Exchange of private demand information by simultaneous signaling.

ABSTRACT: As is well-known from the literature on oligopolistic competition with incomplete information, firms have an incentive to share private demand information. However, by assuming verifiability of demand data, these models ignore the possibility of strategic misinformation. We show that if firms can send misleading demand information, they will do so. Furthermore, we derive a costly signaling mechanism implementing demand revelation, even without verifiability. For the case of a gamma distribution of the firms' demand variables, we prove that the expected gross gains from information revelation exceed the expected cost of signaling if the skewness of the distribution is sufficiently large and the products are sufficiently differentiated.

http://lawprofessors.typepad.com/antitrustprof_blog/2011/09/exchange-of-private-demand-information-by-simultaneous-signaling-.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef015434ad2938970c

Listed below are links to weblogs that reference Exchange of private demand information by simultaneous signaling :

Comments

Post a comment