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Information Sharing Networks in Oligopoly

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  • Yong-Ju Lee

    (Yeungnam University)

Abstract

We analyze the information sharing incentives of firms in a decentralized environment when firms face a stochastic demand. In order to do that, we develop a two stage model of strategic network formation, which consists of cooperative network formation in the first stage and noncooperative Bayesian Cournot competition in the second stage. Then we derive pure strategy mixed cooperative and noncooperative equilibria that are stable and subgameperfect, and characterize the equilibrium graph structure. Our main finding is that the incentives of firms for information sharing may vary depending on whether the decision is made in a centralized or a decentralized environment.

Suggested Citation

  • Yong-Ju Lee, 2014. "Information Sharing Networks in Oligopoly," Korean Economic Review, Korean Economic Association, vol. 30, pages 41-66.
    • Handle: RePEc:kea:keappr:ker-20140630-30-1-03
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    References listed on IDEAS

    as
    1. Esther Gal-or, 1986. "Information Transmission—Cournot and Bertrand Equilibria," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 85-92.
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    3. 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.
    4. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
    5. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-1320, December.
    6. Roger B. Myerson, 1977. "Graphs and Cooperation in Games," Mathematics of Operations Research, INFORMS, vol. 2(3), pages 225-229, August.
    7. William Novshek & Hugo Sonnenschein, 1982. "Fulfilled Expectations Cournot Duopoly with Information Acquisition and Release," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 214-218, Spring.
    8. Watts, Alison, 2001. "A Dynamic Model of Network Formation," Games and Economic Behavior, Elsevier, vol. 34(2), pages 331-341, February.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Information Sharing; Networks; Pairwise Stability; Strong Stability; Graph;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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