Exchange of private demand information by simultaneous signaling

Arbeitspapier

As is well-known from the literature on oligopolistic competition with incomplete information, firms have an incentive to share private demand information. However, by assuming verifiability of demand data, these models ignore the possibility of strategic misinformation. We show that if firms can send misleading demand information, they will do so. Furthermore, we derive a costly signaling mechanism implementing demand revelation, even without verifiability. For the case of a gamma distribution of the firms' demand variables, we prove that the expected gross gains from information revelation exceed the expected cost of signaling if the skewness of the distribution is sufficiently large and the products are sufficiently differentiated.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: University of Tübingen Working Papers in Economics and Finance ; No. 17

Classification and Topics

• Classification: Wirtschaft ; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games ; Asymmetric and Private Information; Mechanism Design ; Oligopoly and Other Imperfect Markets
• Subject: Information sharing ; simultaneous signaling ; demand uncertainty

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Stadler, Manfred
• Event: Veröffentlichung
• (who): University of Tübingen, Faculty of Economics and Social Sciences
• (where): Tübingen
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/48628
• URN: urn:nbn:de:bsz:21-opus-57395