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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. Maura P. Doyle & Christopher M. Snyder, 1999. "Information Sharing and Competition in the Motor Vehicle Industry," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1326-1364, December.
    2. 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.
    3. 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.
    4. Cho, Myeonghwan & Jun, Byung-hill, 2013. "Information sharing with competition," Economics Letters, Elsevier, vol. 119(1), pages 81-84.
    5. 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.
    6. Kashefi, Mohammad Ali, 2012. "Supply chain configuration under information sharing," MPRA Paper 41460, University Library of Munich, Germany.

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