Optimal Disclosure of Private Information to Competitors

Rosina Rodríguez Olivera ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: I study the incentives of an informed firm to share its private information with its competitor and the incentives of a regulator to constrain or enforce disclosure in order to benefit consumers. Firms offer differentiated goods, compete a là Bertrand and one firm has an information advantage about demand over its competitor. I show that full disclosure of information is optimal for the informed firm, because it increases price correlation and surplus extraction from consumers. A regulator can increase expected consumer surplus and welfare by restricting disclosure, but consumers can benefit from the regulator privately disclosing some information to the competitor. Disclosure increases the ability of firms to extract surplus from consumers, but private disclosure creates a coordination failure in firm pricing. The optimal disclosure policy is chosen to induce goods to be closer substitutes and intensify the competition across firms.

Keywords: Competition; Information (search for similar items in EconPapers)
JEL-codes: D18 D43 (search for similar items in EconPapers)
Pages: 37
Date: 2024-07
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta, nep-des, nep-gth, nep-ind, nep-mic and nep-reg
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