The effects of information on strategic investment and welfare

Jacco Thijssen, Kuno Huisman and Peter Kort

Economic Theory, 2006, vol. 28, issue 2, 399-424

Abstract: The paper analyses the influence of uncertainty and competition on the strategic considerations of a firm’s investment decision, where the firm receives imperfect signals about the profitability of an investment project. We find a preemptive or an attrition equilibrium depending on a trade-off between first and second mover advantages. We show that welfare can be negatively affected by decreasing uncertainty, i.e. more and/or better information. Furthermore, simulations indicate that duopoly leads to higher welfare than monopoly if there are few and relatively non-informative signals, whereas the opposite holds if there are many and relatively informative signals. Copyright Springer-Verlag Berlin/Heidelberg 2006

Keywords: Uncertainty; Strategic investment; Imperfect information; Welfare. (search for similar items in EconPapers)
Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
http://hdl.handle.net/10.1007/s00199-005-0628-3 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: The Effects of Information on Strategic Investment and Welfare (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:28:y:2006:i:2:p:399-424

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

DOI: 10.1007/s00199-005-0628-3

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().