We examine the standard assumption in the strategic trade policy literature that governments possess complete information. Assuming instead that firms have better information, we explore the long-term incentives for firms to consistently disclose information to their governments in the standard setting. We find that with quantity competition firms disclose both demand and cost information to the governments, thereby giving some justification to the literature’s omniscient-government assumption. Further, the equilibrium exhibits an informational prisoner’s dilemma with demand uncertainty, but not with cost uncertainty. With price competition, however, firms have no incentives to disclose information.
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Paper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number
0530.
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.:
Chaim Fershtman & Kenneth L Judd, 1984.
"Equilibrium Incentives in Oligopoly,"
Discussion Papers
642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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