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Conversations among Competitors

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  • Jeremy C. Stein

Abstract

I develop a model of bilateral conversations in which players honestly exchange ideas with their competitors. The key to incentive compatibility is complementarity in the information structure: a player can generate a new insight only if he has access to his counterpart’s previous thoughts on a topic. I then examine a social network in which A has a conversation with B, then B has a conversation with C, and so on. Relatively underdeveloped ideas can travel long distances over the network. More valuable ideas, by contrast, tend to remain localized among small groups of agents. (JEL D83)

Suggested Citation

  • Jeremy C. Stein, 2008. "Conversations among Competitors," American Economic Review, American Economic Association, vol. 98(5), pages 2150-2162, December.
    • Handle: RePEc:aea:aecrev:v:98:y:2008:i:5:p:2150-62
    Note: DOI: 10.1257/aer.98.5.2150
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    References listed on IDEAS

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    1. Lauren Cohen & Andrea Frazzini & Christopher Malloy, 2008. "The Small World of Investing: Board Connections and Mutual Fund Returns," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 951-979, October.
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    9. Harrison Hong & Jeffrey D. Kubik & Jeremy C. Stein, 2005. "Thy Neighbor's Portfolio: Word‐of‐Mouth Effects in the Holdings and Trades of Money Managers," Journal of Finance, American Finance Association, vol. 60(6), pages 2801-2824, December.
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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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