Information Sharing with Capacity Uncertainty: The Case of Coffee

Amy Farmer

Canadian Journal of Economics, 1994, vol. 27, issue 2, 415-32

Abstract: When faced with uncertain capacity constraints, Cournot oligopolists face two problems: should they share information once it becomes known to them and can quantity collusion be sustained. This paper shows that agreeing to reveal information does not always increase expected profits as it does in previous models in which the uncertainty is a constant marginal cost parameter. The paper also demonstrates that when collusion is not enforceable and information cannot be reliably shared, trigger strategies can support equilibrium profits greater than Cournot profits when demand is known and supply is uncertain, a situation found in agricultural markets such as coffee.

Date: 1994
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