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
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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

‘Lead, Follow or Cooperate’: Endogenous Timing & Cooperation in Symmetric Duopoly Games.

‘Lead, Follow or Cooperate’: Endogenous Timing & Cooperation in Symmetric Duopoly Games.

Date: 2011
By: Marco Marini (Department of Economics, Society & Politics, Università di Urbino “Carlo Bo" and CREI, Università di Roma III)
Giorgio Rodano (Dipartimento di Informatica e Sistemistica “Antonio Ruberti", Università di Roma “La Sapienza")
URL: http://d.repec.org/n?u=RePEc:urb:wpaper:11_12&r=net
The aim of this paper is to extend Hamilton and Slutsky’s (1990) endogenous timing game by including the possibility for players to cooperate. At an initial stage players are assumed to announce both their purpose to play early or late a given duopoly game as well as their intention to cooperate or not with their rival. The cooperation and timing formation rule is rather simple: when both players agree to cooperate and play with a given timing, they end up playing their actions coordinately and simultaneously. Otherwise, they play as singletons with the timing as prescribed by their own announcement. We check for the existence of a subgame perfect Nash equilibrium (in pure strategies) of such a cooperation-timing duopoly game. Two main results on the emergence of cooperation are provided. If players’ actions in the symmetric duopoly game are strategic substitutes and there is no discount, cooperating early (as a grand coalition) is a subgame perfect equilibrium of the extended timing-cooperation game. Conversely, cooperating late (at period two) represents an equilibrium when playersstrategies are strategic complements. Other equilibria are also possible. Most importantly, our model shows that, in general, the success of cooperation is a¤ected by the endogenous timing of the game. Moreover, the slope of players’ best-replies appears crucial both for the success of cooperation as well as for the players’ choice of sequencing their market actions.
Keywords: Endogenous Timing, Cooperation
JEL: C70