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Communication in Cournot oligopoly

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  • Goltsman, Maria
  • Pavlov, Gregory

Abstract

This paper studies communication in a static Cournot duopoly model under the assumption that the firms have unverifiable private information about their costs. We investigate the conditions under which the firms cannot transmit any information through cheap talk, and show that when these conditions are violated, it may be possible to construct informative cheap-talk equilibria. If the firms can communicate through a third party, communication can be informative even when informative cheap talk is impossible. We exhibit a simple mediated mechanism that ensures informative communication and interim Pareto dominates the uninformative equilibrium for the firms.

Suggested Citation

  • Goltsman, Maria & Pavlov, Gregory, 2014. "Communication in Cournot oligopoly," Journal of Economic Theory, Elsevier, vol. 153(C), pages 152-176.
  • Handle: RePEc:eee:jetheo:v:153:y:2014:i:c:p:152-176
    DOI: 10.1016/j.jet.2014.06.008
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    Cited by:

    1. Raghul Venkatesh, 2019. "Communication and Commitment with Constraints in International Alliances," Working Papers halshs-01962239, HAL.
    2. Ganguly, Chirantan & Ray, Indrajit, 2015. "Information-Revelation and Coordination Using Cheap Talk in a Game with Two-Sided Private Information," Cardiff Economics Working Papers E2015/7, Cardiff University, Cardiff Business School, Economics Section.
    3. Josef Schroth, 2016. "Supervising Financial Regulators," Staff Working Papers 16-52, Bank of Canada.
    4. Maija Halonen-Akatwijuka & In-Uck Park, 2017. "Coordination of Humanitarian Aid," Bristol Economics Discussion Papers 17/691, School of Economics, University of Bristol, UK.
    5. Chirantan Ganguly & Indrajit Ray, 2013. "Information-Revelation and Coordination Using Cheap Talk in a Battle of the Sexes with Two-Sided Private Information," Discussion Papers 13-01r, Department of Economics, University of Birmingham.
    6. Josef Schroth, 2015. "Risk Sharing in the Presence of a Public Good," Staff Working Papers 15-27, Bank of Canada.

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    More about this item

    Keywords

    Cournot oligopoly; Communication; Information; Cheap talk; Mediation;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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