Exchange of private demand information by simultaneous signaling

Manfred Stadler

No 17, University of Tübingen Working Papers in Business and Economics from University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics

Abstract: As is well-known from the literature on oligopolistic competition with incomplete information, firms have an incentive to share private demand information. However, by assuming verifiability of demand data, these models ignore the possibility of strategic misinformation. We show that if firms can send misleading demand information, they will do so. Furthermore, we derive a costly signaling mechanism implementing demand revelation, even without verifiability. For the case of a gamma distribution of the firms' demand variables, we prove that the expected gross gains from information revelation exceed the expected cost of signaling if the skewness of the distribution is sufficiently large and the products are sufficiently differentiated.

Keywords: Information sharing; simultaneous signaling; demand uncertainty (search for similar items in EconPapers)
JEL-codes: C73 D82 L13 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-com, nep-cta and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuewef:17

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