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Industrial Espionage with a Noisy Intelligence

Author

Listed:
  • Yair Tauman

    () (Department of Economics, Stony Brook University)

  • Alex Barrachina

    () (University of Valencia and ERI-CES.)

Abstract

We analyze industrial espionage in a model of two firms: a monopoly incumbent, M, and a potential entrant, E, who owns a noisy intelligence system (IS) of a certain precision a . The IS generates a signal on M’s action and E decides whether or not to enter based on this signal. We show that if a is commonly known, M is the one who benefits from a perfect IS and E who spies on M prefers a less accurate IS. If however a is a private information of E, the opposite result is obtained. E is best off with a perfect IS and M with a less accurate one.

Suggested Citation

  • Yair Tauman & Alex Barrachina, 2012. "Industrial Espionage with a Noisy Intelligence," Department of Economics Working Papers 12-06, Stony Brook University, Department of Economics.
  • Handle: RePEc:nys:sunysb:12-06
    as

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    File URL: http://www.stonybrook.edu/commcms/economics/research/papers/2012/IndustrialEspionagewithaNoisyIntelligence.pdf
    File Function: First version, 2012
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    References listed on IDEAS

    as
    1. Sudipta Sarangi & Pascal Billand & Christophe Bravard & S. Chakrabarti, 2009. "Spying in Multi-market Oligopolies," Departmental Working Papers 2009-11, Department of Economics, Louisiana State University.
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    More about this item

    Keywords

    Espionage; Monopoly; Entry; Asymmetric information; Signaling game.;

    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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