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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.

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File URL: http://economics.uwo.ca/research/department_working_papers_docs//wp2012/wp2012_1.pdf
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Paper provided by University of Western Ontario, Department of Economics in its series UWO Department of Economics Working Papers with number 20121.

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Date of creation: 2012
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Handle: RePEc:uwo:uwowop:20121
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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

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