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Information exchange with cost uncertainty: An alternative approach and new results

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  • Hornig, Stephan O.

Abstract

This paper further develops the standard modelling of information exchange between firms in the presence of cost uncertainty. In order to avoid consistency problems, we replace the normal distribution of the random variables, commonly used because of its convenient mathematical properties, by an alternative one, namely a non-symmetrically distributed random variable with a binomial positive outcome. This leads to new results concerning firms' information-disclosure policy: Confirming the empirical evidence and in contrast to the existing literature, we show that in Cournot markets firms never exchange their private information and in Bertrand markets only for very steep demand functions.

Suggested Citation

  • Hornig, Stephan O., 2004. "Information exchange with cost uncertainty: An alternative approach and new results," Tübinger Diskussionsbeiträge 240, University of Tübingen, School of Business and Economics.
    • Handle: RePEc:zbw:tuedps:240
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    References listed on IDEAS

    as
    1. Masahiro Okuno-Fujiwara & Andrew Postlewaite & Kotaro Suzumura, 1990. "Strategic Information Revelation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(1), pages 25-47.
    2. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-343, March.
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    Cited by:

    1. Hager, Svenja & Schöbel, Rainer, 2006. "Deriving the dependence structure of portfolio credit derivatives using evolutionary algorithms," Tübinger Diskussionsbeiträge 300, University of Tübingen, School of Business and Economics.
    2. Rostek, Stefan & Schöbel, Rainer, 2006. "Risk preference based option pricing in a fractional Brownian market," Tübinger Diskussionsbeiträge 299, University of Tübingen, School of Business and Economics.
    3. Pitterle, Ingo A. & Steffen, Dirk, 2004. "Welfare effects of fiscal policy under alternative exchange rate regimes: the role of the scale variable of money demand," MPRA Paper 13047, University Library of Munich, Germany, revised Oct 2004.

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    More about this item

    Keywords

    information sharing; cost uncertainty; oligopoly;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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