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Partial Certifiability and Information Precision in a Cournot Game

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  • Frédéric KOESSLER

Abstract

This paper examines strategic information revelation in a Cournot duopoly with incomplete information about firm~1\'s cost and information precision. Firm~2 relies on certifiable and ex post submissions of firm~1, without necessarily knowing whether firm~1 knows its cost or not. The sequential equilibria of the induced communication game are determined for different certifiability possibilities. A perfectly cevealing equilibrium in which information precision is irrelevant is obtained under full certifiability. On the contrary, it is shown that if only payoff-relevant (fundamental) events can be certified, then the equilibrium output and profit of firm~1 decreases with its average information precision if this firm is uninformed or if its cost is high. A consequence of this local effect is that information precision has, on average, no value for a firm.

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Bibliographic Info

Paper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2002-03.

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Date of creation: 2002
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Handle: RePEc:ulp:sbbeta:2002-03

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Keywords: Strategic information revelation; Information precision; Cournot competition; Cost uncertainty; Higher order uncertainty.;

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  1. Glazer, J. & Rubinstein, A., 1997. "Debates and Decisions: On a Rationale of Argumentation Rules," Papers 17-97, Tel Aviv.
  2. Lipman Barton L. & Seppi Duane J., 1995. "Robust Inference in Communication Games with Partial Provability," Journal of Economic Theory, Elsevier, vol. 66(2), pages 370-405, August.
  3. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-43, March.
  4. Shin Hyun Song, 1994. "The Burden of Proof in a Game of Persuasion," Journal of Economic Theory, Elsevier, vol. 64(1), pages 253-264, October.
  5. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
  6. Shapiro, Carl, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 433-46, July.
  7. Okuno-Fujiwara, Masahiro & Postlewaite, Andrew & Suzumura, Kotaro, 1990. "Strategic Information Revelation," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 25-47, January.
  8. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-83, December.
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