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Information Acquisition in Cournot Markets: An (enhanced) two- Stage Approach

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  • Eliane Catilina

    (Washington and Lee University)

Abstract

This paper presents an alternative or enhanced approach to information acquisition in Cournot markets with stochastic demand in which the cost of information acquisition is endogenously determined by firms\222 information purchasing strategy. I propose a two-stage model in which in the first stage each firm decides whether it will join a coalition to purchase information and therefore share the cost of information acquisition, to individually purchase information, or to remain uninformed. In the second-stage firms engage in Cournot competition to choose output. The model I propose encompasses the main assumptions of the current view on information acquisition, mainly those related to the role of information and how it affects firms\222 profits. However, I will argue that by adding natural assumptions on oligopolists\222 behavior, I can offer a model that provides a better description of firms\222 actions and trade\226offs than the standard view. Keywords: Information Acquisition, Cournot Markets, Subgame Perfect Nash equilibrium, Strong Nash Equilibrium.

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Bibliographic Info

Paper provided by EconWPA in its series Game Theory and Information with number 0205005.

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Length: 43 pages
Date of creation: 05 Mar 2002
Date of revision:
Handle: RePEc:wpa:wuwpga:0205005

Note: Type of Document - pdf; pages: 43
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Web page: http://128.118.178.162

Related research

Keywords: Information Acquistion; Cournot Market; Strong Nash Equilibrium;

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References

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  1. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-43, March.
  2. Raith, Michael, 1996. "A General Model of Information Sharing in Oligopoly," Journal of Economic Theory, Elsevier, vol. 71(1), pages 260-288, October.
  3. Esther Hauk & Sjaak Hurkens, 2001. "Secret information acquisition in Cournot markets," Economic Theory, Springer, vol. 18(3), pages 661-681.
  4. Paul R. Milgrom & John Roberts, 1985. "Relying on the Information of Interested Parties," Cowles Foundation Discussion Papers 749, Cowles Foundation for Research in Economics, Yale University.
  5. Lode Li, 1985. "Cournot Oligopoly with Information Sharing," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 521-536, Winter.
  6. Jean-Pierre Ponssard, 1979. "The Strategic Role of Information on the Demand Function in an Oligopolistic Market," Management Science, INFORMS, vol. 25(3), pages 243-250, March.
  7. Vives, Xavier, 1988. "Aggregation of Information in Large Cournot Markets," Econometrica, Econometric Society, vol. 56(4), pages 851-76, July.
  8. Richard N. Clarke, 1983. "Collusion and the Incentives for Information Sharing," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 383-394, Autumn.
  9. Gal-Or, Esther, 1986. "Information Transmission-Cournot and Bertrand Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 85-92, January.
  10. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
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