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Partial Certifiability and Information Precision in a Cournot Game

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  • Frédéric KOESSLER

Abstract

This paper examines strategic information revelation in a Cournot duopoly with incomplete information about firm~1\'s cost and information precision. Firm~2 relies on certifiable and ex post submissions of firm~1, without necessarily knowing whether firm~1 knows its cost or not. The sequential equilibria of the induced communication game are determined for different certifiability possibilities. A perfectly cevealing equilibrium in which information precision is irrelevant is obtained under full certifiability. On the contrary, it is shown that if only payoff-relevant (fundamental) events can be certified, then the equilibrium output and profit of firm~1 decreases with its average information precision if this firm is uninformed or if its cost is high. A consequence of this local effect is that information precision has, on average, no value for a firm.

Suggested Citation

  • Frédéric KOESSLER, 2002. "Partial Certifiability and Information Precision in a Cournot Game," Working Papers of BETA 2002-03, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  • Handle: RePEc:ulp:sbbeta:2002-03
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    References listed on IDEAS

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    1. Masahiro Okuno-Fujiwara & Andrew Postlewaite & Kotaro Suzumura, 1990. "Strategic Information Revelation," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 25-47.
    2. Glazer, Jacob & Rubinstein, Ariel, 2001. "Debates and Decisions: On a Rationale of Argumentation Rules," Games and Economic Behavior, Elsevier, vol. 36(2), pages 158-173, August.
    3. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-483, December.
    4. Lipman Barton L. & Seppi Duane J., 1995. "Robust Inference in Communication Games with Partial Provability," Journal of Economic Theory, Elsevier, vol. 66(2), pages 370-405, August.
    5. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
    6. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-343, March.
    7. Shin Hyun Song, 1994. "The Burden of Proof in a Game of Persuasion," Journal of Economic Theory, Elsevier, vol. 64(1), pages 253-264, October.
    8. Carl Shapiro, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 433-446.
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    More about this item

    Keywords

    Strategic information revelation; Information precision; Cournot competition; Cost uncertainty; Higher order uncertainty.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • 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

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