Welfare Effects of Endogenous Information Acquisition and Disclosure in Duopoly Markets

Kazunori Miwa

No DP2016-17, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper investigates the interaction between firms' information acquisition decisions and disclosure of internally acquired information in a Cournot duopoly market. The results are as follows. Given that the precision of firms' private information is constant, mandatory disclosure of information about the industry-wide demand uncertainty can enhance social welfare. However, when the precision of firms' private information is endogenously determined, mandatory disclosure is not always desirable. This is because when disclosure is mandated, firms acquire less precise information compared to the case where acquired information is not disclosed, and hence their internal information environments are deteriorated. This can lead to "unintended consequences," such that disclosure regulation strictly decreases social welfare on the whole.

Keywords: Information acquisition; Disclosure; Duopoly; Social welfare (search for similar items in EconPapers)
JEL-codes: L13 M41 M48 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2016-03
New Economics Papers: this item is included in nep-cdm, nep-com, nep-mic and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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