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Competitive Effects of Disclosure in a Strategic Entry Model

Author

Listed:
  • Yuhchang Hwang

    (Arizona State University)

  • Alison J. Kirby

    (Boston University)

Abstract

We investigate the welfare consequences of incumbent firms' mutual disclosure of cost information when there is a threat of entry from a firm not required to disclose its private cost information. New effects of disclosure are observed relative to no-entry models, with the result that incumbents' expected output is a decreasing function of the disclosure level. However, further analysis shows that increased disclosure usually increases incumbent expected profits and decreases expected consumer surplus, despite the additional entry effect of disclosure. Such analytical derivations provide objective input to the FASB as they attempt to predict the competitive effects of changing mandated disclosure requirements.

Suggested Citation

  • Yuhchang Hwang & Alison J. Kirby, 2000. "Competitive Effects of Disclosure in a Strategic Entry Model," Review of Accounting Studies, Springer, vol. 5(1), pages 57-85, March.
    • Handle: RePEc:spr:reaccs:v:5:y:2000:i:1:d:10.1023_a:1009664918749
    DOI: 10.1023/A:1009664918749
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    References listed on IDEAS

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    Cited by:

    1. Suil Pae, 2000. "Information Sharing in the Presence of Preemptive Incentives: Economic Consequences of Mandatory Disclosure," Review of Accounting Studies, Springer, vol. 5(4), pages 331-350, December.

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