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Strategic Information Acquisition

Author

Listed:
  • Dan Sasaki

    (Institute of Economics, University of Copenhagen)

Abstract

This paper discusses the value of information in games with state contingent payoffs, using a simple two-stage duopoly model. In the first stage, each duopolist simultaneously chooses whether to observe the market demand, which is either high or low. The second stage game is an ordinary simultaneous-move duopoly game, where profits depend upon the state of demand. There, information acquisition in the first stage becomes strategically complemental if second-stage actions are strategic complements. In such a case, within a certain range of information acquisition cost profiles, there are multiple equilibria in one of which both duopolists acquire information in the first stage, in the other neither duopolist does. If actions in the second stage are strategic substitutes, then the information acquisition in the first stage becomes strategically substitutional. In this case, there is a range of information acquisition cost profiles where there exist multiple equilibria.

Suggested Citation

  • Dan Sasaki, 1997. "Strategic Information Acquisition," Discussion Papers 97-07, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:9707
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    Citations

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    Cited by:

    1. 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.

    More about this item

    Keywords

    value of information; strategic complementarity; strategic substitution; ranked (nested) information; differential (nonnested) information;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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