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Cournot competition and the social value of information

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  • Myatt, David P.
  • Wallace, Chris

Abstract

In a differentiated-product Cournot model, each supplier receives informative signals about demand. The cross-industry correlations of the signals differ: more public signals have higher correlation coefficients. In equilibrium, information is used inefficiently. From the industry's perspective, information is over-used, and too much emphasis is placed on relatively public signals; from the consumer's perspective, information is under-used, and too much emphasis is placed on relatively private signals. Welfare is enhanced by increasing the use of information (as desired by consumers) but re-balancing that use away from public signals (as desired by the industry). If information is costly and endogenously acquired, then suppliers acquire too much new information, but they use it too little.

Suggested Citation

  • Myatt, David P. & Wallace, Chris, 2015. "Cournot competition and the social value of information," Journal of Economic Theory, Elsevier, vol. 158(PB), pages 466-506.
  • Handle: RePEc:eee:jetheo:v:158:y:2015:i:pb:p:466-506
    DOI: 10.1016/j.jet.2014.07.011
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    Citations

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    Cited by:

    1. Li, Yunan, 2019. "Efficient mechanisms with information acquisition," Journal of Economic Theory, Elsevier, vol. 182(C), pages 279-328.
    2. Myatt, David P. & Wallace, Chris, 2019. "Information acquisition and use by networked players," Journal of Economic Theory, Elsevier, vol. 182(C), pages 360-401.
    3. Jeitschko, Thomas D. & Liu, Ting & Wang, Tao, 2018. "Information Acquisition, signaling and learning in duopoly," International Journal of Industrial Organization, Elsevier, vol. 61(C), pages 155-191.
    4. Camille Cornand & Rodolphe Dos Santos Ferreira, 2015. "Cooperation in a differentiated duopoly when information is dispersed: A beauty contest game with endogenous concern for coordination," Working Papers 1501, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    5. Camille Cornand & Rodolphe dos Santos Ferreira, 2017. "The social value of information and the competition motive: Price vs. quantity games," Working Papers halshs-01614815, HAL.
    6. Roy, Nilanjan, 2017. "Action revision, information and collusion in an experimental duopoly market," MPRA Paper 77033, University Library of Munich, Germany.
    7. Pavan, Alessandro & Vives, Xavier, 2015. "Information, Coordination, and Market Frictions: An Introduction," Journal of Economic Theory, Elsevier, vol. 158(PB), pages 407-426.
    8. Anna Bayona, 2018. "The social value of information with an endogenous public signal," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 66(4), pages 1059-1087, December.
    9. Camille Cornand & Rodolphe Dos Santos Ferreira, 2015. "Playing the game the others want to play: Keynes’ beauty contest revisited," Working Papers of BETA 2015-01, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    10. Francesca Pancotto & Giuseppe Pignataro & Davide Raggi, 2015. "Social Learning and Higher Order Beliefs: A Structural Model of Exchange Rates Dynamics," LEM Papers Series 2015/24, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    11. P. Figini & S. Cicognani & L. Zirulia, 2019. "Booking in the Rain: Testing the impact of public information on prices," Working Papers wp1137, Dipartimento Scienze Economiche, Universita' di Bologna.
    12. Han, Jungsuk & Sangiorgi, Francesco, 2018. "Searching for information," Journal of Economic Theory, Elsevier, vol. 175(C), pages 342-373.

    More about this item

    Keywords

    Cournot oligopoly; Uncertainty; Bayesian equilibrium; Information acquisition; Public and private information;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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