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Entry and espionage with noisy signals

Author

Listed:
  • Alex Barrachina

    () (University Carlos III)

  • Yair Tauman

    () (IDC Herzliya and Stony Brook)

  • Amparo Urbano Salvador

    () (ERI-CES)

Abstract

We analyze industrial espionage in the context of entry deterrence. We consider a monopoly incumbent, who may expand capacity to deter entry, and a potential entrant who owns an inaccurate Intelligence System. The Intelligence System generates a noisy signal on incumbent’s actions and the potential entrant decides whether to enter based on this signal. If the precision of the Intelligence System is commonly known, the incumbent will signal-jam to manipulate the distribution of likely signals and hence the entrant’s decisions. Therefore, the incumbent will benefit from his rival’s espionage. In contrast, the spying firm (the entrant) will typically gain if the espionage accuracy is sufficiently high and privately known by her. In this setting, the market will be more competitive under espionage.

Suggested Citation

  • Alex Barrachina & Yair Tauman & Amparo Urbano Salvador, 2013. "Entry and espionage with noisy signals," Discussion Papers in Economic Behaviour 0113, University of Valencia, ERI-CES.
  • Handle: RePEc:dbe:wpaper:0113
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alex Barrachina, 2016. "Entry under an information-gathering monopoly," Working Papers 2016/09, Economics Department, Universitat Jaume I, Castellón (Spain).
    2. Alex Barrachina & Yair Tauman & Amparo Urbano Salvador, 2014. "Entry with Two Correlated Signals," Discussion Papers in Economic Behaviour 0714, University of Valencia, ERI-CES.
    3. Po-Lu Chen, 2016. "Cross-Country Economic Espionage and Investment in Research and Development," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(4), pages 146-155, April.

    More about this item

    Keywords

    Espionage; Entry; Asymmetric information; Signal-Jamming.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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