Strategic Disclosure of Demand Information by Duopolists: Theory and Experiment

Date: 2014-09-01
By: Jos Jansen (Department of Economics and Business, Aarhus University, Denmark)
Andreas Pollak (University of Cologne)
URL: http://d.repec.org/n?u=RePEc:aah:aarhec:2014-20&r=net
We study the strategic disclosure of demand information and product-market strategies of duopolists. In a setting where firms may fail to receive information, we show that firms selectively disclose information in equilibrium in order to influence their competitor’s product-market strategy. Subsequently, we analyze the firms’ behavior in a laboratory experiment. We find that subjects often use selective disclosure strategies, and this finding appears to be robust to changes in the information structure, the mode of competition, and the degree of product differentiation. Moreover, subjects in our experiment display product-market conduct that is largely consistent with theoretical predictions.
Keywords: duopoly, Cournot competition, Bertrand competition, information disclosure, incomplete information, common value, product differentiation, asymmetry, skewed distribution, laboratory experiment
JEL: C92 D22 D82 D83 L13 M4

Strategic Disclosure of Demand Information by Duopolists: Theory and Experiment

Date: 2014-09-01
By: Jos Jansen
Andreas Pollak
URL: http://d.repec.org/n?u=RePEc:kls:series:0075&r=net
We study the strategic disclosure of demand information and product-market strategies of duopolists. In a setting where firms may fail to receive information, we show that firms selectively disclose information in equilibrium in order to influence their competitor’s product-market strategy. Subsequently, we analyze the firms’ behavior in a laboratory experiment. We find that subjects often use selective disclosure strategies, and this finding appears to be robust to changes in the information structure, the mode of competition, and the degree of product differentiation. Moreover, subjects in our experiment display product-market conduct that is largely consistent with theoretical predictions.
Keywords: duopoly, Cournot competition, Bertrand competition, information disclosure, incomplete information, common value, product differentiation, asymmetry, skewed distribution, laboratory experiment
JEL: C92 D22 D82 D83 L13 M4