Information in Cournot: Signaling with Incomplete Control

Wassim Daher, Leonard Mirman and Marc Santugini ()
Additional contact information
Marc Santugini: IEA, HEC Montréal, http://www.hec.ca/iea/

No 09-09, Cahiers de recherche from HEC Montréal, Institut d'économie appliquée

Abstract: We embed signaling in the classical Cournot model in which several firms sell a homogeneous good. The quality is known to all the firms, but only to some buyers. The quantity-setting firms can manipulate the price to signal quality. Because there is only one price in a market for a homogeneous good, each firm incompletely controls the price-signal through the quantity decision. We characterize the unique signaling Cournot equilibrium in which the price signals quality to the uninformed buyers. We then compare the signaling Cournot equilibrium with the full-information Cournot equilibrium. Signaling is shown to increase the equilibrium price. Moreover, under certain conditions regarding the composition of buyers, the number of firms, and the distribution of costs across firms, the effects of signalling and market externality cancel each other. In other words, the profits under signaling Cournot equal the profits of a cartel in a full-information environment.

Keywords: Cournot; Homogeneous good; Learning; Quality; Signaling. (search for similar items in EconPapers)
JEL-codes: D21 D43 D82 D83 L15 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2009-12, Revised 2011-11
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind and nep-mic
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.hec.ca/iea/cahiers/2009/iea0909_msantugini_v2.pdf (application/pdf)

Related works:
Journal Article: Information in Cournot: Signaling with incomplete control (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iea:carech:0909

Ordering information: This working paper can be ordered from
Institut d'économie appliquée HEC Montréal 3000, Chemin de la Côte-Sainte-Catherine Montréal, Québec H3T 2A7

The price is Free.

Access Statistics for this paper

More papers in Cahiers de recherche from HEC Montréal, Institut d'économie appliquée Institut d'économie appliquée HEC Montréal 3000, Chemin de la Côte-Sainte-Catherine Montréal, Québec H3T 2A7. Contact information at EDIRC.
Bibliographic data for series maintained by Patricia Power ().