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Market share transparency, signaling and welfare: Cournot and Bertrand

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  • David Spector

Abstract

When demand is noisy and firms? costs are private information, the availability of market share data increases the accuracy of each firm?s information, and it creates incentives for signaling. Taking both effects into account, we find that under quantity competition with a homogeneous good, the availability of market share data has a positive impact on total surplus and an ambiguous one on consumer surplus. Under price competition with differentiated substitutes, it has a negative impact on consumer surplus and an ambiguous one on total surplus. If the cost difference is small, the effect of first-period signaling dominates the effect of second-period full information. Accordingly, in this case, the availability of market share data causes total and consumer surplus to increase in the case of quantity competition and to decrease in the case of price competition. JEL classification: C73, D82, L13.

Suggested Citation

  • David Spector, 2021. "Market share transparency, signaling and welfare: Cournot and Bertrand," Revue d'économie industrielle, De Boeck Université, vol. 0(4), pages 129-167.
    • Handle: RePEc:cai:reidbu:rei_176_0129
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    Keywords

    duopoly; signaling;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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