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Beyond the Need to Boast: Cost Concealment Incentives and Exit in Cournot Duopoly

Author

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  • Jos Jansen

    (Max Planck Institute for Research on Collective Goods, Bonn)

Abstract

This paper studies the incentives for production cost disclosure in an asymmetric Cournot duopoly. Whereas the efficient firm (consumers) prefers information sharing (concealment) when the firms choose accommodating strategies in the product market, the firm (consumers) may prefer information concealment (sharing) when it can exclude its competitor from the market. Hence, the rankings of expected profit and consumer surplus can be reversed if exit of the inefficient firm is possible. Although the efficient firm has stronger incentives to share information when it shares strategically, there remain cases in which the firm conceals information in equilibrium to induce exit.

Suggested Citation

  • Jos Jansen, 2009. "Beyond the Need to Boast: Cost Concealment Incentives and Exit in Cournot Duopoly," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2009_32, Max Planck Institute for Research on Collective Goods.
    • Handle: RePEc:mpg:wpaper:2009_32
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    File URL: http://www.coll.mpg.de/pdf_dat/2009_32online.pdf
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    More about this item

    Keywords

    cost asymmetry; Cournot duopoly; exit; information disclosure; precommitment;
    All these keywords.

    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

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