The Effects of the Asymmetry of Information Intrafirms on Oligopolistic Market Outcomes

Tetsuya Shinkai () and Makoto Okamura
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Makoto Okamura: Hiroshima University

No 29, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: We consider an oligopoly with a principal-agent relationship, in which a firm's marginal cost is decreasing in a manager's managerial effort and is subject to an additive uncertainty. Two types of firms operate: one displays symmetric information between the owner and the manager, another presents asymmetric information. We show that if the marginal cost's derivative of the manager is sufficiently small, then the expected effort level in an asymmetric information firm exceeds that in a symmetric one. We also show that the expected total output and consumer surplus may reduce at equilibrium, as the number of symmetric information firms increases.

Keywords: asymmetric information; incentive scheme; competition effort; oligopoly (search for similar items in EconPapers)
JEL-codes: D82 L13 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2006-04, Revised 2006-04
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:29

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