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Conversations Among Competitors

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  • Jeremy C. Stein

Abstract

I develop a model of bilateral conversations in which players may honestly exchange ideas with their competitors. The key to incentive compatibility is a strong form of complementarity in the information structure: a player can only generate a useful new insight on a given topic if he has access to his counterpart's previous thoughts on the topic. I then embed this model into a linear social network in which player A first can have a conversation with player B, then player B can have a conversation with player C, and so on. I show that relatively underdeveloped ideas can travel long distances over the network and thus be shared by many agents. More valuable ideas, by contrast, tend to remain localized among small groups of agents.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13370.

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Date of creation: Sep 2007
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Publication status: published as Jeremy C. Stein, 2008. "Conversations among Competitors," American Economic Review, American Economic Association, vol. 98(5), pages 2150-62, December.
Handle: RePEc:nbr:nberwo:13370

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  1. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  2. Ellison, Glenn & Fudenberg, Drew, 1995. "Word-of-Mouth Communication and Social Learning," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 93-125, February.
  3. Paolo Colla & Antonio Mele, 2010. "Information Linkages and Correlated Trading," Review of Financial Studies, Society for Financial Studies, vol. 23(1), pages 203-246, January.
  4. Mathias Dewatripont & Jean Tirole, 2005. "Modes of Communication," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1217-1238, December.
  5. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  6. Harrison Hong & Jeffrey D. Kubik & Jeremy C. Stein, 2005. "Thy Neighbor's Portfolio: Word-of-Mouth Effects in the Holdings and Trades of Money Managers," Journal of Finance, American Finance Association, vol. 60(6), pages 2801-2824, December.
  7. Hellmann, Thomas F & Perotti, Enrico C, 2006. "The Circulation of Ideas: Firms Versus Markets," CEPR Discussion Papers 5469, C.E.P.R. Discussion Papers.
  8. Krishna, Vijay & Morgan, John, 2004. "The art of conversation: eliciting information from experts through multi-stage communication," Journal of Economic Theory, Elsevier, vol. 117(2), pages 147-179, August.
  9. Lauren Cohen & Andrea Frazzini & Christopher Malloy, 2008. "The Small World of Investing: Board Connections and Mutual Fund Returns," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 951-979, October.
  10. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
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Cited by:
  1. Thomas Hellmann & Enrico Perotti, 2011. "The Circulation of Ideas in Firms and Markets," Management Science, INFORMS, vol. 57(10), pages 1813-1826, October.
  2. Antonio Mele, 2008. "Information Linkages and Correlated Trading," FMG Discussion Papers dp620, Financial Markets Group.
  3. Michela Rancan, 2013. "The Value of Social Networks in Financial Markets," RSCAS Working Papers 2013/21, European University Institute.
  4. Haeussler, Carolin & Jiang, Lin & Thursby, Jerry & Thursby, Marie, 2014. "Specific and general information sharing among competing academic researchers," Research Policy, Elsevier, vol. 43(3), pages 465-475.
  5. Bernhard Ganglmair & Emanuele Tarantino, 2012. "Patent Disclosure in Standard Setting," NBER Working Papers 17999, National Bureau of Economic Research, Inc.
  6. Markus Kinateder, 2009. "Team Formation in a Network," Working Papers 2009.36, Fondazione Eni Enrico Mattei.
  7. Wioletta Dziuda & Ronen Gradwohl, 2013. "Achieving Cooperation under Privacy Concerns," Discussion Papers 1572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Gupta-Mukherjee, Swasti, 2013. "When active fund managers deviate from their peers: Implications for fund performance," Journal of Banking & Finance, Elsevier, vol. 37(4), pages 1286-1305.
  9. Carolin Haeussler & Lin Jiang & Jerry Thursby & Marie C. Thursby, 2009. "Specific and General Information Sharing Among Academic Scientists," NBER Working Papers 15315, National Bureau of Economic Research, Inc.
  10. Manela, Asaf, 2014. "The value of diffusing information," Journal of Financial Economics, Elsevier, vol. 111(1), pages 181-199.

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