The Advantages of Imprecise Information
AbstractA firm in a duopolistic market in which there is incomplete information about cost may benefit from having less precise prior information than its competitor. Experience in production provides firms with internally generated private signals about cost. As a result, the marginal return to production includes the value of information as well as the marginal revenue of production. Hence, the firm with less information about cost has the greater incentive to produce. Imprecise prior information thus provides a mechanism that enables the firm to commit to expand production relative to its rival.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 19 (1988)
Issue (Month): 2 (Summer)
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Web page: http://www.rje.org
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- Andrew F. Daughety & Jennifer F. Reinganum, 2008.
"Imperfect competition and quality signalling,"
RAND Journal of Economics,
RAND Corporation, vol. 39(1), pages 163-183.
- Andrew F. Daughety & Jennifer F. Reinganum, 2005. "Imperfect Competition and Quality Signaling," Vanderbilt University Department of Economics Working Papers 0520, Vanderbilt University Department of Economics.
- Lin, C.-Y. Cynthia & Muelegger, Erich, 2007. "Using Approximations to Competitors’ Private Information: An Application of Cognitive Costs to Strategic Behavior," Working Paper Series rwp07-025, Harvard University, John F. Kennedy School of Government.
- Neubauer, Silke, 1997. "Interdivisional information sharing: the strategic advantage of knowing nothing," Discussion Papers, Research Unit: Market Dynamics FS IV 97-33, Social Science Research Center Berlin (WZB).
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