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Private Information, Strategic Behavior, and Efficiency in Cournot Markets

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  • Xavier Vives

Abstract

When analyzing a Cournot market with strictly convex costs dependent on a private information parameter, do we err more by ignoring market power or by ignoring the impact of incomplete information? Is the welfare loss at the market outcome driven by private information or by market power? The answer to both questions is that in large enough markets, abstracting from market power provides a much better approximation than abstracting from private information. Let n index the size of the market and the (free entry) number of firms. Then the effect of market power (private information) is of the order of 1/n (1/√n) for prices and 1/n

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Bibliographic Info

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

Volume (Year): 33 (2002)
Issue (Month): 3 (Autumn)
Pages: 361-376

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Handle: RePEc:rje:randje:v:33:y:2002:i:autumn:p:361-376

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Cited by:
  1. Paolo Coccorese, 2010. "Information Exchange as a Means of Collusion: The Case of the Italian Car Insurance Market," Journal of Industry, Competition and Trade, Springer, Springer, vol. 10(1), pages 55-70, March.
  2. Banal-Estanol, Albert & Heidhues, Paul & Nitsche, Rainer & Seldeslachts, Jo, 2009. "Screening and Merger Activity," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University 270, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  3. Doyle, Martin W. & Yates, Andrew J., 2010. "Stream ecosystem service markets under no-net-loss regulation," Ecological Economics, Elsevier, Elsevier, vol. 69(4), pages 820-827, February.
  4. Roy Chowdhury, Prabal & Sengupta, Kunal, 2009. "Transparency, complementarity and holdout," MPRA Paper 17606, University Library of Munich, Germany.
  5. Tunay I. Tunca, 2004. "Information Precision and Asymptotic Efficiency of Industrial Markets," Working Papers, NET Institute 04-11, NET Institute, revised Oct 2004.
  6. Kovalenkov, Alexander & Vives, Xavier, 2014. "Competitive rational expectations equilibria without apology," Journal of Economic Theory, Elsevier, Elsevier, vol. 149(C), pages 211-235.
  7. Mariana Cunha & Paula Sarmento & Hélder Vasconcelos, 2014. "Uncertain Efficiency Gains and Merger Policy," FEP Working Papers, Universidade do Porto, Faculdade de Economia do Porto 527, Universidade do Porto, Faculdade de Economia do Porto.
  8. De Borger, Bruno & Fosgerau, Mogens, 2012. "Information provision by regulated public transport companies," MPRA Paper 42267, University Library of Munich, Germany.
  9. Cooper, James C. & Wright, Joshua D., 2012. "Alcohol, antitrust, and the 21st Amendment: An empirical examination of post and hold laws," International Review of Law and Economics, Elsevier, Elsevier, vol. 32(4), pages 379-392.
  10. Tunca, Tunay I., 2008. "Information precision and asymptotic efficiency of industrial markets," Journal of Mathematical Economics, Elsevier, Elsevier, vol. 44(9-10), pages 964-996, September.
  11. Albert Banal-Esta?l, 2002. "Information-Sharing Implications of Horizontal Mergers," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 544.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  12. Nisvan Erkal & Daniel Piccinin, 2006. "Horizontal Mergers with Free Entry in Differentiated Oligopolies," Department of Economics - Working Papers Series, The University of Melbourne 976, The University of Melbourne.
  13. 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.
  14. Davidson, Carl & Mukherjee, Arijit, 2007. "Horizontal mergers with free entry," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 25(1), pages 157-172, February.
  15. Basso, Leonardo J. & Zhang, Anming, 2008. "On the relationship between airport pricing models," Transportation Research Part B: Methodological, Elsevier, Elsevier, vol. 42(9), pages 725-735, November.

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