IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Communication in Cournot Oligopoly

We study communication in a static Cournot duopoly model under the assumption that the firms have unverifiable private information about their costs. We show that cheap talk between the firms cannot transmit any information. However, if the firms can communicate through a third party, communication can be informative even when it is not substantiated by any commitment or costly actions. We exhibit a simple mechanism that ensures informative communication and interim Pareto dominates the uninformative equilibrium for the firms.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://economics.uwo.ca/research/department_working_papers_docs//wp2012/wp2012_1.pdf
Download Restriction: no

Paper provided by University of Western Ontario, Department of Economics in its series UWO Department of Economics Working Papers with number 20121.

as
in new window

Length:
Date of creation: 2012
Handle: RePEc:uwo:uwowop:20121
Contact details of provider: Postal:
Department of Economics, Reference Centre, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2

Phone: 519-661-2111 Ext.85244
Web page: http://economics.uwo.ca/research/research_papers/department_working_papers.html

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Joseph Farrell and Robert Gibbons., 1988. "Cheap Talk Can Matter in Bargaining," Economics Working Papers 8863, University of California at Berkeley.
  2. Amir, Rabah & Jin, Jim Y. & Troege, Michael, 2010. "Robust results on the sharing of firm-specific information: Incentives and welfare effects," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 855-866, September.
  3. Maura P. Doyle & Christopher M. Snyder, 1997. "Information sharing and competition in the motor vehicle industry," Finance and Economics Discussion Series 1997-4, Board of Governors of the Federal Reserve System (U.S.).
  4. Peter Cramton & Thomas R. Palfrey, 1991. "Cartel Enforcement with Uncertainty About Costs," Papers of Peter Cramton 90ier, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
  5. Banks, Jeffrey S. & Calvert, Randall L., 1992. "A battle-of-the-sexes game with incomplete information," Games and Economic Behavior, Elsevier, vol. 4(3), pages 347-372, July.
  6. Robert J. Aumann & Sergiu Hart, 2002. "Long Cheap Talk," Discussion Paper Series dp284, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem, revised Nov 2002.
  7. Sandeep Baliga & Tomas Sjostrom, 2001. "Arms Races and Negotiations," Levine's Working Paper Archive 391749000000000005, David K. Levine.
  8. Gall, Thomas & Reinstein, David, 2015. "Losing Face," Economics Discussion Papers 14460, University of Essex, Department of Economics.
  9. Esther Gal-or, 1986. "Information Transmission—Cournot and Bertrand Equilibria," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 85-92.
  10. Lehrer, Ehud, 1991. "Internal Correlation in Repeated Games," International Journal of Game Theory, Springer;Game Theory Society, vol. 19(4), pages 431-456.
  11. Van Zandt, Timothy & Vives, Xavier, 2007. "Monotone equilibria in Bayesian games of strategic complementarities," Journal of Economic Theory, Elsevier, vol. 134(1), pages 339-360, May.
  12. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
  13. Vida, Péter & Āzacis, Helmuts, 2013. "A detail-free mediator," Games and Economic Behavior, Elsevier, vol. 81(C), pages 101-115.
  14. Kai-Uwe Kühn, 2001. "Fighting collusion by regulating communication between firms," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 167-204, 04.
  15. Gerardi, Dino, 2004. "Unmediated communication in games with complete and incomplete information," Journal of Economic Theory, Elsevier, vol. 114(1), pages 104-131, January.
  16. Andreas Blume & Oliver Board, 2013. "Language Barriers," Econometrica, Econometric Society, vol. 81(2), pages 781-812, 03.
  17. Alison J. Kirby, 1988. "Trade Associations as Information Exchange Mechanisms," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 138-146, Spring.
  18. Watson, Joel, 1996. "Information Transmission When the Informed Party Is Confused," Games and Economic Behavior, Elsevier, vol. 12(1), pages 143-161, January.
  19. Seidmann, Daniel J., 1990. "Effective cheap talk with conflicting interests," Journal of Economic Theory, Elsevier, vol. 50(2), pages 445-458, April.
  20. Liu, Luchuan, 1996. "Correlated Equilibrium of Cournot Oligopoly Competition," Journal of Economic Theory, Elsevier, vol. 68(2), pages 544-548, February.
  21. Baliga, Sandeep & Morris, Stephen, 2002. "Co-ordination, Spillovers, and Cheap Talk," Journal of Economic Theory, Elsevier, vol. 105(2), pages 450-468, August.
  22. Nicolas Vieille & Olivier Gossner, 2001. "Repeated communication through the mechanism and," Post-Print hal-00465040, HAL.
  23. repec:dau:papers:123456789/6031 is not listed on IDEAS
  24. Matthews, Steven A. & Postlewaite, Andrew, 1989. "Pre-play communication in two-person sealed-bid double auctions," Journal of Economic Theory, Elsevier, vol. 48(1), pages 238-263, June.
  25. FORGES, Françoise, "undated". "Universal mechanisms," CORE Discussion Papers RP 914, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  26. David Genesove & Wallace P. Mullin, 1997. "The Sugar Institute Learns to Organize Information Exchange," NBER Working Papers 5981, National Bureau of Economic Research, Inc.
  27. Board, Oliver J. & Blume, Andreas & Kawamura, Kohei, 2007. "Noisy talk," Theoretical Economics, Econometric Society, vol. 2(4), December.
  28. FORGES , Françoise, 1993. "Five Legitimate Definitions of Correlated Equilibrium in Games with Incomplete Information," CORE Discussion Papers 1993009, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  29. Ehud Lehrer, 1988. "Internal Correlation in Repeated Games," Discussion Papers 800, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  30. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414.
  31. Dov Fried, 1984. "Incentives for Information Production and Disclosure in a Duopolistic Environment," The Quarterly Journal of Economics, Oxford University Press, vol. 99(2), pages 367-381.
  32. Goltsman, Maria & Hörner, Johannes & Pavlov, Gregory & Squintani, Francesco, 2009. "Mediation, arbitration and negotiation," Journal of Economic Theory, Elsevier, vol. 144(4), pages 1397-1420, July.
  33. Subir K. Chakrabarti, 2010. "Collusive Equilibrium In Cournot Oligopolies With Unknown Costs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(4), pages 1209-1238, November.
  34. Johannes Horner & Massimo Morelli & Francesco Squintani, 2010. "Mediation and Peace," Economics Working Papers ECO2010/32, European University Institute.
  35. William Novshek & Hugo Sonnenschein, 1982. "Fulfilled Expectations Cournot Duopoly with Information Acquisition and Release," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 214-218, Spring.
  36. Raith, Michael, 1996. "A General Model of Information Sharing in Oligopoly," Journal of Economic Theory, Elsevier, vol. 71(1), pages 260-288, October.
  37. Masahiro Okuno-Fujiwara & Andrew Postlewaite & Kotaro Suzumura, 1990. "Strategic Information Revelation," Review of Economic Studies, Oxford University Press, vol. 57(1), pages 25-47.
  38. Olivier Gossner & Nicolas Vieille, 2001. "Repeated communication through the mechanism," International Journal of Game Theory, Springer;Game Theory Society, vol. 30(1), pages 41-60.
  39. Lode Li, 1985. "Cournot Oligopoly with Information Sharing," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 521-536, Winter.
  40. Carl Shapiro, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 433-446.
  41. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-343, March.
  42. Amir Ziv, 1993. "Information Sharing in Oligopoly: The Truth-Telling Problem," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 455-465, Autumn.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:uwo:uwowop:20121. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.