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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. Choi, Jay Pil, 1998. "Information concealment in the theory of vertical integration," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 35(1), pages 117-131, March.
    2. Ferré Carracedo, Montserrat, 2006. "Would Fiscal Authorities in the EMU prefer to coordinate?," Working Papers, Universitat Rovira i Virgili, Department of Economics 2072/3687, Universitat Rovira i Virgili, Department of Economics.
    3. Marcoul, Philippe, 2002. "Information Sharing and Oligopoly in Agricultural Markets: The Role of Bargaining Associations," Staff General Research Papers, Iowa State University, Department of Economics 10029, Iowa State University, Department of Economics.
    4. Maura P. Doyle & Christopher M. Snyder, 1997. "Information sharing and competition in the motor vehicle industry," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1997-4, Board of Governors of the Federal Reserve System (U.S.).
    5. Cho, Myeonghwan & Jun, Byung-hill, 2013. "Information sharing with competition," Economics Letters, Elsevier, Elsevier, vol. 119(1), pages 81-84.
    6. Stadler, Manfred, 2011. "Exchange of private demand information by simultaneous signaling," University of Tuebingen Working Papers in Economics and Finance, University of Tuebingen, Faculty of Economics and Social Sciences 17, University of Tuebingen, Faculty of Economics and Social Sciences.
    7. 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, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences 0603, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences, revised 24 Apr 2006.
    8. Malueg, David A. & Tsutsui, Shunichi O., 1996. "Duopoly information exchange: The case of unknown slope," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 14(1), pages 119-136.
    9. repec:ebl:ecbull:v:12:y:2006:i:9:p:1-10 is not listed on IDEAS
    10. 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, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 22232, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    11. Stroffolini, Francesca, 2012. "Access profit-sharing regulation with information acquisition and transmission," Research in Economics, Elsevier, Elsevier, vol. 66(2), pages 161-174.
    12. Francesca Stroffolini, 2009. "Access Profit-Sharing Regulation with Information Transmission and Acquisition," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 214, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    13. Olivier Armantier, Oliver Richard, 2001. "Entry and Exchanges of Cost Information," Department of Economics Working Papers, Stony Brook University, Department of Economics 01-06, Stony Brook University, Department of Economics.
    14. Ferré, Montserrat, 2008. "Fiscal policy coordination in the EMU," Journal of Policy Modeling, Elsevier, Elsevier, vol. 30(2), pages 221-235.
    15. repec:ebl:ecbull:v:5:y:2004:i:15:p:1-7 is not listed on IDEAS
    16. Olivier Armantier & Oliver Richard, 2000. "Exchanges of Cost Information in the Airline Industry," Department of Economics Working Papers, Stony Brook University, Department of Economics 00-04, Stony Brook University, Department of Economics.
    17. Piccolo, Salvatore & Pagnozzi, Marco, 2013. "Information sharing between vertical hierarchies," Games and Economic Behavior, Elsevier, Elsevier, vol. 79(C), pages 201-222.
    18. Kashefi, Mohammad Ali, 2012. "Supply chain configuration under information sharing," MPRA Paper 41460, University Library of Munich, Germany.
    19. Shamir, Noam, 2012. "Strategic information sharing between competing retailers in a supply chain with endogenous wholesale price," International Journal of Production Economics, Elsevier, Elsevier, vol. 136(2), pages 352-365.
    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, Elsevier, vol. 13(3), pages 283-304.
    21. Andrew F. Daughety, 2006. "Cournot Competition," Vanderbilt University Department of Economics Working Papers, Vanderbilt University Department of Economics 0620, Vanderbilt University Department of Economics.

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