The Effects of the Asymmetry of Information Intrafirms on Oligopolistic Market Outcomes
AbstractWe consider an oligopoly with a principal-agent relationship, in which a firm's marginal cost is decreasing in a manager's managerial effort and is subject to an additive uncertainty. Two types of firms operate: one displays symmetric information between the owner and the manager, another presents asymmetric information. We show that if the marginal cost's derivative of the manager is sufficiently small, then the expected effort level in an asymmetric information firm exceeds that in a symmetric one. We also show that the expected total output and consumer surplus may reduce at equilibrium, as the number of symmetric information firms increases.
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Bibliographic InfoPaper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 29.
Length: 25 pages
Date of creation: Apr 2006
Date of revision: Apr 2006
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asymmetric information; incentive scheme; competition effort; oligopoly;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-09 (All new papers)
- NEP-BEC-2007-04-09 (Business Economics)
- NEP-COM-2007-04-09 (Industrial Competition)
- NEP-IND-2007-04-09 (Industrial Organization)
- NEP-MIC-2007-04-09 (Microeconomics)
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.:
- Oliver D. Hart, 1983. "The Market Mechanism as an Incentive Scheme," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 366-382, Autumn.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414.
- Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743.
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