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Information Sharing Networks in Oligopoly

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  • Sergio Currarni

    ()
    (Department of Economics, University Of Venice Cà Foscari)

  • Francesco Feri

    (University of Innsbruck)

Abstract

We study the incentives of oligopolistic firms to share private information on demand parameters. Differently from previous studies, we consider bilateral sharing agreements, by which firms commit at the ex-ante stage to truthfully share information. We show that if signals are i.i.d., then pairwise stable networks of sharing agreements are either empty or made of fully connected components of increasing size. When linking is costly, non complete components may emerge, and components with larger size are less densly connected than components with smaller size. When signals have different variances, incomplete and irregular network can be stable, with firms observing high variance signals acting as "critical nodes". Finally, when signals are correlated, the empty network may not be pairwise stable when the number of firms and/or correlation are large enough.

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Bibliographic Info

Paper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2008_16.

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Length: 34
Date of creation: 2008
Date of revision:
Handle: RePEc:ven:wpaper:2008_16

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Keywords: Information sharing; oligopoly; networks; Bayesian equilibrium;

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  1. Matthew O. Jackson & Asher Wolinsky, 1994. "A Strategic Model of Social and Economic Networks," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1098, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, Econometric Society, vol. 53(2), pages 329-43, March.
  3. Lode Li, 1985. "Cournot Oligopoly with Information Sharing," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 521-536, Winter.
  4. Richard N. Clarke, 1983. "Collusion and the Incentives for Information Sharing," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 14(2), pages 383-394, Autumn.
  5. Alison J. Kirby, 1988. "Trade Associations as Information Exchange Mechanisms," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 138-146, Spring.
  6. Raith, Michael, 1996. "A General Model of Information Sharing in Oligopoly," Journal of Economic Theory, Elsevier, Elsevier, vol. 71(1), pages 260-288, October.
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