IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v46y2000i8p1075-1084.html
   My bibliography  Save this article

Market Information and Firm Performance

Author

Listed:
  • Jagmohan S. Raju

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104-6371)

  • Abhik Roy

    (The Hong Kong Polytechnic University, Kowloon, Hong Kong)

Abstract

The value of new information depends on how accurate the information is, but it may also depend on the characteristics of the firm and the nature of the industry it operates in. We develop a game-theoretic model to understand how firm and industry characteristics moderate the effect of market information on firm profits. Our results suggest that information is more valuable when product substitutability is higher, suggesting that information is of greater value in more competitive industries. Our results also suggest that although industry size does not affect the value of information, information is more valuable for larger firms. We find that, except under some conditions, more precise market information has a greater impact on profits in a Stackelberg mode of conduct than in a Bertrand-Nash mode.

Suggested Citation

  • Jagmohan S. Raju & Abhik Roy, 2000. "Market Information and Firm Performance," Management Science, INFORMS, vol. 46(8), pages 1075-1084, August.
    • Handle: RePEc:inm:ormnsc:v:46:y:2000:i:8:p:1075-1084
    DOI: 10.1287/mnsc.46.8.1075.12024
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.46.8.1075.12024
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.46.8.1075.12024?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Gregory S. Carpenter & Lee G. Cooper & Dominique M. Hanssens & David F. Midgley, 1988. "Modeling Asymmetric Competition," Marketing Science, INFORMS, vol. 7(4), pages 393-412.
    2. Richard N. Clarke, 1983. "Collusion and the Incentives for Information Sharing," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 383-394, Autumn.
    3. Milgrom, Paul, 1994. "Comparing Optima: Do Simplifying Assumptions Affect Conclusions?," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 607-615, June.
    4. David Besanko & Sachin Gupta & Dipak Jain, 1998. "Logit Demand Estimation Under Competitive Pricing Behavior: An Equilibrium Framework," Management Science, INFORMS, vol. 44(11-Part-1), pages 1533-1547, November.
    5. Miklos Sarvary & Philip M. Parker, 1997. "Marketing Information: A Competitive Analysis," Marketing Science, INFORMS, vol. 16(1), pages 24-38.
    6. Abhik Roy & Dominique M. Hanssens & Jagmohan S. Raju, 1994. "Competitive Pricing by a Price Leader," Management Science, INFORMS, vol. 40(7), pages 809-823, July.
    7. V. Padmanabhan & Ram C. Rao, 1993. "Warranty Policy and Extended Service Contracts: Theory and an Application to Automobiles," Marketing Science, INFORMS, vol. 12(3), pages 230-247.
    8. Cyert, Richard M & DeGroot, Morris H, 1973. "An Analysis of Cooperation and Learning in a Duopoly Context," American Economic Review, American Economic Association, vol. 63(1), pages 24-37, March.
    9. Gasmi, F & Laffont, J J & Vuong, Q, 1992. "Econometric Analysis of Collusive Behavior in a Soft-Drink Market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(2), pages 277-311, Summer.
    10. Vrinda Kadiyali, 1996. "Entry, Its Deterrence, and Its Accommodation: A Study of the U.S. Photographic Film Industry," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 452-478, Autumn.
    11. Basar, Tamer & Ho, Yu-Chi, 1974. "Informational properties of the Nash solutions of two stochastic nonzero-sum games," Journal of Economic Theory, Elsevier, vol. 7(4), pages 370-387, April.
    12. K. Sridhar Moorthy, 1988. "Strategic Decentralization in Channels," Marketing Science, INFORMS, vol. 7(4), pages 335-355.
    13. Cyert, Richard M & DeGroot, Morris H, 1970. "Bayesian Analysis and Duopoly Theory," Journal of Political Economy, University of Chicago Press, vol. 78(5), pages 1168-1184, Sept.-Oct.
    14. Jagmohan S. Raju & V. Srinivasan, 1996. "Quota-Based Compensation Plans for Multiterritory Heterogeneous Salesforces," Management Science, INFORMS, vol. 42(10), pages 1454-1462, October.
    15. Ronald W. Hilton, 1981. "The Determinants of Information Value: Synthesizing Some General Results," Management Science, INFORMS, vol. 27(1), pages 57-64, January.
    16. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
    17. Amiya K. Basu & Rajiv Lal & V. Srinivasan & Richard Staelin, 1985. "Salesforce Compensation Plans: An Agency Theoretic Perspective," Marketing Science, INFORMS, vol. 4(4), pages 267-291.
    18. Timothy W. McGuire & Richard Staelin, 1983. "An Industry Equilibrium Analysis of Downstream Vertical Integration," Marketing Science, INFORMS, vol. 2(2), pages 161-191.
    19. Rajiv Lal, 1986. "Technical Note—Delegating Pricing Responsibility to the Salesforce," Marketing Science, INFORMS, vol. 5(2), pages 159-168.
    20. Donald G. Morrison & David C. Schmittlein, 1991. "How Many Forecasters Do You Really Have? Mahalanobis Provides the Intuition for the Surprising Clemen and Winkler Result," Operations Research, INFORMS, vol. 39(3), pages 519-523, June.
    21. Robert C. Blattberg & Stephen J. Hoch, 1990. "Database Models and Managerial Intuition: 50% Model + 50% Manager," Management Science, INFORMS, vol. 36(8), pages 887-899, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yan, Ruiliang & Ghose, Sanjoy, 2010. "Forecast information and traditional retailer performance in a dual-channel competitive market," Journal of Business Research, Elsevier, vol. 63(1), pages 77-83, January.
    2. Mukhopadhyay, Samar K. & Yue, Xiaohang & Zhu, Xiaowei, 2011. "A Stackelberg model of pricing of complementary goods under information asymmetry," International Journal of Production Economics, Elsevier, vol. 134(2), pages 424-433, December.
    3. Lim, Wei Shi & Tang, Christopher S., 2006. "An auction model arising from an Internet search service provider," European Journal of Operational Research, Elsevier, vol. 172(3), pages 956-970, August.
    4. K. Sudhir, 2001. "Structural Analysis of Manufacturer Pricing in the Presence of a Strategic Retailer," Marketing Science, INFORMS, vol. 20(3), pages 244-264, October.
    5. Rakesh Niraj & Chakravarthi Narasimhan, 2017. "Examining Incentives to Share Demand Information with your Channel Partner," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 16(04), pages 961-980, July.
    6. Pradeep Bhardwaj, 2001. "Delegating Pricing Decisions," Marketing Science, INFORMS, vol. 20(2), pages 143-169, September.
    7. Xu, Su Xiu & Lu, Qiang & Huang, George Q. & Zhang, Ting, 2013. "Scope economies, market information, and make-or-buy decision under asymmetric information," International Journal of Production Economics, Elsevier, vol. 145(1), pages 339-348.
    8. K. Sudhir, 2001. "Competitive Pricing Behavior in the Auto Market: A Structural Analysis," Marketing Science, INFORMS, vol. 20(1), pages 42-60, January.
    9. K. Sudhir & Pradeep K. Chintagunta & Vrinda Kadiyali, 2005. "Time-Varying Competition," Marketing Science, INFORMS, vol. 24(1), pages 96-109, September.
    10. Li Jiang & Zhongyuan Hao, 2016. "Incentive-Driven Information Dissemination in Two-Tier Supply Chains," Manufacturing & Service Operations Management, INFORMS, vol. 18(3), pages 393-413, July.
    11. Putsis, William P., Jr., 1998. "Empirical Analysis of Competitive Interaction in Food Product Categories," Research Reports 25221, University of Connecticut, Food Marketing Policy Center.
    12. Cotterill, Ronald W & Putsis, William P, Jr & Dhar, Ravi, 2000. "Assessing the Competitive Interaction between Private Labels and National Brands," The Journal of Business, University of Chicago Press, vol. 73(1), pages 109-137, January.
    13. Naufel J. Vilcassim & Vrinda Kadiyali & Pradeep K. Chintagunta, 1999. "Investigating Dynamic Multifirm Market Interactions in Price and Advertising," Management Science, INFORMS, vol. 45(4), pages 499-518, April.
    14. Yue, Xiaohang & Liu, John, 2006. "Demand forecast sharing in a dual-channel supply chain," European Journal of Operational Research, Elsevier, vol. 174(1), pages 646-667, October.
    15. Markus Christen, 2005. "Research Note---Cost Uncertainty Is Bliss: The Effect of Competition on the Acquisition of Cost Information for Pricing New Products," Management Science, INFORMS, vol. 51(4), pages 668-676, April.
    16. Pradeep Bhardwaj & Sridhar Balasubramanian, 2005. "Managing Channel Profits: The Role of Managerial Incentives," Quantitative Marketing and Economics (QME), Springer, vol. 3(3), pages 247-279, September.
    17. Draganska, Michaela & Klapper, Daniel & Villas-Boas, Sofia B, 2008. "A Larger Slice or a Larger Pie? An Empirical Investigation of Bargaining Power in the Distribution Channel," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7v13q46w, Department of Agricultural & Resource Economics, UC Berkeley.
    18. Jianhua Ma & Xingzheng Ai & Wen Yang & Yanchun Pan, 2019. "Decentralization versus coordination in competing supply chains under retailers’ extended warranties," Annals of Operations Research, Springer, vol. 275(2), pages 485-510, April.
    19. Michaela Draganska & Daniel Klapper & Sofia B. Villas-Boas, 2010. "A Larger Slice or a Larger Pie? An Empirical Investigation of Bargaining Power in the Distribution Channel," Marketing Science, INFORMS, vol. 29(1), pages 57-74, 01-02.
    20. Xingzheng Ai & Jing Chen & Jianhua Ma, 2012. "Contracting with demand uncertainty under supply chain competition," Annals of Operations Research, Springer, vol. 201(1), pages 17-38, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:46:y:2000:i:8:p:1075-1084. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.