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Competitive Intelligence and Disclosure of Cost Information in Duopoly

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  • Tao Wang

    (Nanjing Audit University)

Abstract

This paper considers a duopoly in which one firm doesn’t know its rival’s realized cost but can invest in competitive intelligence (CI) to gather information before competition. The incentive to invest in CI and the net benefit from CI investment are higher under Bertrand competition than under Cournot competition. Ex ante, both the firm that is being spied upon and the industry benefit (suffer) from a rival’s CI investment under Cournot (Bertrand) competition while consumer surplus suffers under both types of competition. Overall, CI investment increases (reduces) social welfare when firms compete à la Cournot (Bertrand). Ex post disclosure of cost information that is acquired may either increase or decrease the incentive to invest in CI but does not affect the qualitative results with respect to profit and welfare analyses.

Suggested Citation

  • Tao Wang, 2020. "Competitive Intelligence and Disclosure of Cost Information in Duopoly," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 665-699, November.
    • Handle: RePEc:kap:revind:v:57:y:2020:i:3:d:10.1007_s11151-019-09735-0
    DOI: 10.1007/s11151-019-09735-0
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    Cited by:

    1. Jonas Send, 2021. "Contest Copycats: Adversarial Duplication of Effort in Contests," Working Papers tax-mpg-rps-2021-17, Max Planck Institute for Tax Law and Public Finance.
    2. Cuihong Fan & Byoung Heon Jun & Elmar G. Wolfstetter, 2023. "Spying and imperfect commitment in first-price auctions: a case of tacit collusion," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(2), pages 255-275, October.
    3. Yin, Xundong & Wang, Sophie Xuefei & Lu, Yuanzhu & Yan, Jianye, 2023. "Endogenous information acquisition and disclosure of private information in a duopoly," Economic Modelling, Elsevier, vol. 126(C).
    4. Cuihong Fan & Byoung Heon Jun & Elmar G. Wolfstetter, 2023. "Price leadership, spying, and secret price changes: a Stackelberg game with imperfect commitment," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(3), pages 775-804, September.
    5. Fan, Cuihong & Jun, Byoung Heon & Wolfstetter, Elmar G., 2022. "Spying in Bertrand markets under incomplete information: Who benefits and is it stable?," Journal of Mathematical Economics, Elsevier, vol. 102(C).

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