Market share transparency, signaling and welfare: Cournot and Bertrand

David Spector

Revue d'économie industrielle, 2021, vol. n° 176, issue 4, 129-167

Abstract: When demand is noisy and firms? costs are private information, the availability of market share data increases the accuracy of each firm?s information, and it creates incentives for signaling. Taking both effects into account, we find that under quantity competition with a homogeneous good, the availability of market share data has a positive impact on total surplus and an ambiguous one on consumer surplus. Under price competition with differentiated substitutes, it has a negative impact on consumer surplus and an ambiguous one on total surplus. If the cost difference is small, the effect of first-period signaling dominates the effect of second-period full information. Accordingly, in this case, the availability of market share data causes total and consumer surplus to increase in the case of quantity competition and to decrease in the case of price competition. JEL classification: C73, D82, L13.

Keywords: duopoly; signaling (search for similar items in EconPapers)
JEL-codes: C73 D82 L13 (search for similar items in EconPapers)
Date: 2021
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