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Innovation and Communication: Signalling with Partial Disclosure

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  • Sudipto Bhattacharya
  • Jay R. Ritter

Abstract

This paper introduces a model of "feedback effect equilibrium" i.e. equilibria in which an asymmetrically informed agent is motivated to communicate its privately known attribute but can do so only through channels or signals which convey directly useful information to competing agents. This revelation to the competition serves to reduce the value of the private information held by the first agent. Models of this kind are of obvious relevance to realistic theories of product or financial market disclosure policies of firms, patenting, and a host of related behavioural and regulatory issues. This model is developed in the context of a set of firms engaged in research and development rivalry, in which the value of privately held and disclosed information arises from its implications for the likelihood and timing of productive innovation.

Suggested Citation

  • Sudipto Bhattacharya & Jay R. Ritter, 1983. "Innovation and Communication: Signalling with Partial Disclosure," Review of Economic Studies, Oxford University Press, vol. 50(2), pages 331-346.
  • Handle: RePEc:oup:restud:v:50:y:1983:i:2:p:331-346.
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    File URL: http://hdl.handle.net/10.2307/2297419
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    References listed on IDEAS

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    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Peter Cramton, 1985. "Sequential Bargaining Mechanisms," Papers of Peter Cramton 85roth, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
    3. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-894, July.
    4. Ausubel, Lawrence M. & Cramton, Peter & Deneckere, Raymond J., 2002. "Bargaining with incomplete information," Handbook of Game Theory with Economic Applications,in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 3, chapter 50, pages 1897-1945 Elsevier.
    5. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-1819, November.
    6. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April.
    7. Drew Fudenberg & David Levine, 1982. "Sequential Equilibria of Finite and Infinite Horizon Games," UCLA Economics Working Papers 242, UCLA Department of Economics.
    8. Drew Fudenberg & Jean Tirole, 1983. "Sequential Bargaining with Incomplete Information," Review of Economic Studies, Oxford University Press, vol. 50(2), pages 221-247.
    9. Joel Sobel & Ichiro Takahashi, 1983. "A Multistage Model of Bargaining," Review of Economic Studies, Oxford University Press, vol. 50(3), pages 411-426.
    10. Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
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