Information Sharing Networks in Oligopoly
We study the incentives of oligoplistic firms to share private information on demand parameters. Differently from previous studies, we consider bilateral sharing agreements, by which firms commit at the ex-ante stage to truthfully share information. We show that if signals are i.i.d., then pairwise stable networks of sharing agreements are either empty or made of fully connected components of increasing size. When linking is costly, non complete components may emerge, and components with larger size are less densily connected than components with smaller size. When signals have different variances, incomplete and irregular network can be stable, with firms observing high variance signals acting as ?critical nodes?. Finally, when signals are correlated, the empty network may not be pairwise stable when the number of firms and/or correlation are large enough.
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561, California Institute of Technology, Division of the Humanities and Social Sciences.
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