Advanced Search
MyIDEAS: Login

Using Approximations to Competitors’ Private Information: An Application of Cognitive Costs to Strategic Behavior

Contents:

Author Info

  • Lin, C.-Y. Cynthia

    (U of Californai, Davis)

  • Muelegger, Erich

    (Harvard U)

Abstract

Owing to cognitive costs, firms may choose strategies using a heuristic based on the expectation of their opponents’ private information rather than using the full information about the distribution of that private information. We find that the degree to which the heuristic and the Bayesian, or "full-information", strategies adopted in equilibrium differ depends on convexity and strategic complementarity or substitutability. Under certain conditions, firms’ equilibrium profits are greater when all firms use heuristics than when all firms use the full information. Our results provide insight into incentives firms may have to either facilitate or impede access to industry information.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://ksgnotes1.harvard.edu/Research/wpaper.nsf/rwp/RWP07-025/$File/rwp_07_025_muehlegger.pdf
Our checks indicate that this address may not be valid because: 404 Not Found (http://ksgnotes1.harvard.edu/Research/wpaper.nsf/rwp/RWP07-025/$File/rwp_07_025_muehlegger.pdf [302 Found]--> http://web.hks.harvard.edu/publications/workingpapers/Index.aspx). If this is indeed the case, please notify ()
Download Restriction: no

Bibliographic Info

Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp07-025.

as in new window
Length:
Date of creation: May 2007
Date of revision:
Handle: RePEc:ecl:harjfk:rwp07-025

Contact details of provider:
Postal: 79 JFK Street, Cambridge, MA 02138
Fax: 617-496-2554
Web page: http://www.ksg.harvard.edu/research/working_papers/index.htm
More information through EDIRC

Related research

Keywords:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Xavier Gabaix & David Laibson & Guillermo Moloche & Stephen Weinberg, 2006. "Costly Information Acquisition: Experimental Analysis of a Boundedly Rational Model," American Economic Review, American Economic Association, vol. 96(4), pages 1043-1068, September.
  2. Shue, Kelly & Luttmer, Erzo F. P., 2006. "Who Misvotes? The Effect of Differential Cognition Costs on Election Outcomes," Working Paper Series rwp06-048, Harvard University, John F. Kennedy School of Government.
  3. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 612-43, August.
  4. Shapiro, Carl, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 433-46, July.
  5. Gal-Or, Esther, 1986. "Information Transmission-Cournot and Bertrand Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 85-92, January.
  6. Esther Gal-Or, 1988. "The Advantages of Imprecise Information," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 266-275, Summer.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ecl:harjfk:rwp07-025. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.