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Information Sharing in Oligopoly: The Truth-Telling Problem

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  • Amir Ziv
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    Abstract

    While under some circumstances information sharing in oligopoly may be beneficial, the literature ignores the possibility of strategic information sharing by assuming verifiability of data. I endogenize the incentives for truthful information sharing and prove that if firms have the ability to send misleading information, they will always do. To overcome this problem I introduce a (costly) mechanism through which the firm will, in its own best interest, reveal the true value of its private information, even though outside verification is impossible. I show that in some cases benefits from information sharing exceed the signalling costs, while in other cases the reverse is true. The fact that I model a two-sided signalling enables me to mitigate the signalling-cost problem. Rather than burning money, oligopolistic rivals may exchange transfer payments, thereby significantly reducing signalling costs.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal RAND Journal of Economics.

    Volume (Year): 24 (1993)
    Issue (Month): 3 (Autumn)
    Pages: 455-465

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    Handle: RePEc:rje:randje:v:24:y:1993:i:autumn:p:455-465

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    Cited by:
    1. Shamir, Noam, 2012. "Strategic information sharing between competing retailers in a supply chain with endogenous wholesale price," International Journal of Production Economics, Elsevier, vol. 136(2), pages 352-365.
    2. Choi, Jay Pil, 1998. "Information concealment in the theory of vertical integration," Journal of Economic Behavior & Organization, Elsevier, vol. 35(1), pages 117-131, March.
    3. Marco Pagnozzi & Salvatore Piccolo, 2012. "Information Sharing between Vertical Hierarchies," CSEF Working Papers 322, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    4. Stroffolini, Francesca, 2012. "Access profit-sharing regulation with information acquisition and transmission," Research in Economics, Elsevier, vol. 66(2), pages 161-174.
    5. Maura P. Doyle & Christopher M. Snyder, 1997. "Information sharing and competition in the motor vehicle industry," Finance and Economics Discussion Series 1997-4, Board of Governors of the Federal Reserve System (U.S.).
    6. Marcoul, Philippe, 2002. "Information Sharing and Oligopoly in Agricultural Markets: The Role of Bargaining Associations," Staff General Research Papers 10029, Iowa State University, Department of Economics.
    7. Ferré, Montserrat, 2008. "Fiscal policy coordination in the EMU," Journal of Policy Modeling, Elsevier, vol. 30(2), pages 221-235.
    8. Olivier Armantier & Oliver Richard, 2000. "Exchanges of Cost Information in the Airline Industry," Department of Economics Working Papers 00-04, Stony Brook University, Department of Economics.
    9. Malueg, David A. & Tsutsui, Shunichi O., 1996. "Duopoly information exchange: The case of unknown slope," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 119-136.
    10. Kashefi, Mohammad Ali, 2012. "Supply chain configuration under information sharing," MPRA Paper 41460, University Library of Munich, Germany.
    11. Stadler, Manfred, 2011. "Exchange of private demand information by simultaneous signaling," University of Tuebingen Working Papers in Economics and Finance 17, University of Tuebingen, Faculty of Economics and Social Sciences.
    12. Hueth, Brent & Marcoul, Philippe, 2003. "Information Sharing and Oligopoly in Agricultural Markets: The Role of Cooperative Bargaining Associations," 2003 Annual meeting, July 27-30, Montreal, Canada 22232, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. repec:ebl:ecbull:v:5:y:2004:i:15:p:1-7 is not listed on IDEAS
    14. repec:ebl:ecbull:v:12:y:2006:i:9:p:1-10 is not listed on IDEAS
    15. Iván Major, 2006. "Why do (or do not) banks share customer information? A comparison of mature private credit markets and markets in transition," IEHAS Discussion Papers 0603, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, revised 24 Apr 2006.
    16. Andrew F. Daughety, 2006. "Cournot Competition," Vanderbilt University Department of Economics Working Papers 0620, Vanderbilt University Department of Economics.
    17. Cho, Myeonghwan & Jun, Byung-hill, 2013. "Information sharing with competition," Economics Letters, Elsevier, vol. 119(1), pages 81-84.
    18. Francesca Stroffolini, 2009. "Access Profit-Sharing Regulation with Information Transmission and Acquisition," CSEF Working Papers 214, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    19. Ferré Carracedo, Montserrat, 2006. "Would Fiscal Authorities in the EMU prefer to coordinate?," Working Papers 2072/3687, Universitat Rovira i Virgili, Department of Economics.
    20. Chang, Chun-Hao & Prakash, Arun J. & Yeh, Shu, 2004. "Sale of monopoly information and behavior of rivaling clients: A theoretical perspective," Review of Financial Economics, Elsevier, vol. 13(3), pages 283-304.
    21. Olivier Armantier, Oliver Richard, 2001. "Entry and Exchanges of Cost Information," Department of Economics Working Papers 01-06, Stony Brook University, Department of Economics.

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