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Competition, Comparative Performance, and Market Transparency

Author

Listed:
  • Bruce I. Carlin
  • Shaun William Davies
  • Andrew Iannaccone

Abstract

We study how competition affects market transparency, taking into account that comparative performance is assessed via tournaments and contests. Extending Dye (1985) to a multi-firm setting in which top performers are rewarded, we show that increased competition usually makes disclosure less likely, which lowers market transparency and may decrease per capita welfare. This result appears to be robust to several model variations and as such, has implications for market regulation. (JEL D82, D83, L77, L25)

Suggested Citation

  • Bruce I. Carlin & Shaun William Davies & Andrew Iannaccone, 2012. "Competition, Comparative Performance, and Market Transparency," American Economic Journal: Microeconomics, American Economic Association, vol. 4(4), pages 202-237, November.
    • Handle: RePEc:aea:aejmic:v:4:y:2012:i:4:p:202-37
    Note: DOI: 10.1257/mic.4.4.202
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    Citations

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    Cited by:

    1. Schmitt, Stefanie Y. & Bruckner, Dominik, 2023. "Unaware consumers and disclosure of deficiencies," Games and Economic Behavior, Elsevier, vol. 142(C), pages 1018-1042.
    2. Raphael Boleslavsky & Christopher Cotton, 2018. "Limited capacity in project selection: competition through evidence production," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 385-421, March.
    3. Gani Aldashev & Esteban Jaimovich & Thierry Verdier, 2023. "The Dark Side of Transparency: Mission Variety and Industry Equilibrium in Decentralised Public Good Provision," The Economic Journal, Royal Economic Society, vol. 133(654), pages 2085-2109.
    4. Parida, Sitikantha & Tang, Zhenyang, 2018. "Price competition in the mutual fund industry," Economic Modelling, Elsevier, vol. 70(C), pages 29-39.
    5. Ginzburg, Boris, 2019. "A Simple Model of Competitive Testing," MPRA Paper 99463, University Library of Munich, Germany.
    6. Klaus Friesenbichler & George Clarke & Michael Wong, 2014. "Price competition and market transparency: evidence from a random response technique," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(1), pages 5-21, February.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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