Learning about common and private values in oligopoly

Dan Bernhardt and Bart Taub

RAND Journal of Economics, 2015, vol. 46, issue 1, 66-85

Abstract: type="main">

We characterize a duopoly buffeted by demand and cost shocks. Firms learn about shocks from common observation, private observation, and noisy price signals. Firms internalize how outputs affect a rival's signal, and hence output. We distinguish how the nature of information —public versus private—and of what firms learn about—common versus private values—affect equilibrium outcomes. Firm outputs weigh private information about private values by more than common values. Thus, prices contain more information about private-value shocks.

Date: 2015
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