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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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    More about this item

    Keywords

    Cournot oligopoly; Uncertainty; Bayesian equilibrium; Information acquisition; Public and private information;
    All these keywords.

    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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