Experimentation, Information sharing and Oligopoly Limit Pricing
AbstractThe paper examines incumbents’ incentives to share information in the presence of entry threat when incumbents face uncertainty about their cost functions. Similar to the experimentation and learning literature, firms in this model can learn more about their costs through output production which simultaneously produces information. I find that in the presence of entry threat, information sharing may not emerge as an equilibrium outcome although information sharing enables firms to actually deter entry through better coordination of strategies. The learning effect of information production plays a crucial role in determining firms’ incentives to share. Both the sharing and non-sharing equilibria are characterised by downward price distortions, whereas entry takes place with a positive probability only in a non-sharing equilibrium.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 99/34.
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Information sharing; Bayesian learning; Entry threat; Cournot Competition.;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-01-07 (All new papers)
- NEP-IND-2000-01-07 (Industrial Organization)
- NEP-INO-2000-01-07 (Innovation)
- NEP-MIC-2000-01-07 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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