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Cooperation in a differentiated duopoly when information is dispersed: A beauty contest game with endogenous concern for coordination

Author

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  • Camille Cornand

    () (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)

  • Rodolphe dos Santos Ferreira

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

Abstract

The paper provides a micro-founded differentiated duopoly illustration of a beauty contest, in which the weight put on the strategic vs. the fundamental motive of the payoffs is not exogenous but may be manipulated by the players. We emphasize the role of the competition component of the strategic motive as a source of conflict with the fundamental motive. This conflict, already present in an oligopolistic setting under perfect information, is only exacerbated when information is imperfect and dispersed. We show how firm owners ease such conflict by opting for some cooperation, thus moderating the competitive toughness displayed by their managers. By doing so, they also influence the managers' strategic concern for coordination and consequently the weight put on public relative to private information.

Suggested Citation

  • 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 halshs-01116156, HAL.
  • Handle: RePEc:hal:wpaper:halshs-01116156
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01116156v5
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    References listed on IDEAS

    as
    1. Xavier Vives, 2017. "Endogenous Public Information and Welfare in Market Games," Review of Economic Studies, Oxford University Press, vol. 84(2), pages 935-963.
    2. Xavier Vives, 2011. "Strategic Supply Function Competition With Private Information," Econometrica, Econometric Society, vol. 79(6), pages 1919-1966, November.
    3. Camille Cornand & Frank Heinemann, 2008. "Optimal Degree of Public Information Dissemination," Economic Journal, Royal Economic Society, vol. 118(528), pages 718-742, April.
    4. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
    5. George-Marios Angeletos & Guido Lorenzoni & Alessandro Pavan, 2010. "Beauty Contests and "Irrational Exuberance": A Neoclassical Approach," Discussion Papers 1502, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    6. Martimort, David & Stole, Lars, 2011. "The Collective Wisdom of Beauty Contests," MPRA Paper 32872, University Library of Munich, Germany.
    7. George-Marios Angeletos & Alessandro Pavan, 2007. "Efficient Use of Information and Social Value of Information," Econometrica, Econometric Society, vol. 75(4), pages 1103-1142, July.
    8. Raith, Michael, 1996. "A General Model of Information Sharing in Oligopoly," Journal of Economic Theory, Elsevier, vol. 71(1), pages 260-288, October.
    9. Miller, Nolan H & Pazgal, Amit I, 2001. "The Equivalence of Price and Quantity Competition with Delegation," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 284-301, Summer.
    10. d'Aspremont, Claude & Dos Santos Ferreira, Rodolphe, 2009. "Price-quantity competition with varying toughness," Games and Economic Behavior, Elsevier, vol. 65(1), pages 62-82, January.
    11. David P. Myatt & Chris Wallace, 2012. "Endogenous Information Acquisition in Coordination Games," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 340-374.
    12. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
    13. Vives, Xavier, 1988. "Aggregation of Information in Large Cournot Markets," Econometrica, Econometric Society, vol. 56(4), pages 851-876, July.
    14. 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.
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    Cited by:

    1. 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.

    More about this item

    Keywords

    D82; L13; dispersed information JEL codes: D43; beauty contest; dispersed information; public information; competition; cooperation; coordination; delegation game; differentiated duopoly; L21;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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