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A Dynamic Duopoly Model with Asymmetric Information

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  • Caminal, Ramon

Abstract

This paper investigates the impact of asymmetric information on the set of equilibria of a two-period duopoly game with price competition. It turns out that all admissible sequential equilibria of this game share a "collusive" character, i.e., ex ante expected profits for a firm of any type are higher than in the complete information case. For small uncertainties, the results are asymmetric: a small probability of a "good" type firm does not make much difference on the set of equilibrium payoffs, but a small probability of a "bad" type firm does. These results survive the introduction of Kohlberg and Martens' (1986) stability concept. Copyright 1990 by Blackwell Publishing Ltd.

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  • Caminal, Ramon, 1990. "A Dynamic Duopoly Model with Asymmetric Information," Journal of Industrial Economics, Wiley Blackwell, vol. 38(3), pages 315-333, March.
    • Handle: RePEc:bla:jindec:v:38:y:1990:i:3:p:315-33
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    Cited by:

    1. Dan Bernhardt & Bart Taub, 2015. "Learning about common and private values in oligopoly," RAND Journal of Economics, RAND Corporation, vol. 46(1), pages 66-85, March.
    2. David Spector, 2021. "Market share transparency, signaling and welfare: Cournot and Bertrand," Working Papers halshs-02946654, HAL.
    3. Barrachina, Alex & Tauman, Yair & Urbano, Amparo, 2014. "Entry and espionage with noisy signals," Games and Economic Behavior, Elsevier, vol. 83(C), pages 127-146.
    4. Akira Miyaoka, 2019. "The Signaling Effect of Emission Taxes Under International Duopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(3), pages 691-720, March.
    5. Jeitschko, Thomas D. & Liu, Ting & Wang, Tao, 2018. "Information Acquisition, signaling and learning in duopoly," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 155-191.
    6. Qing Ye & Izak Duenyas & Roman Kapuscinski, 2013. "Should competing firms reveal their capacity?," Naval Research Logistics (NRL), John Wiley & Sons, vol. 60(1), pages 64-86, February.
    7. Keshab BHATTARAI, 2008. "Bargaining, Coalitions, Signalling and Repeated Games for Economic Development and Poverty Alleviation," EcoMod2008 23800012, EcoMod.

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