Competitive Effects of Disclosure in a Strategic Entry Model

Yuhchang Hwang and Alison J. Kirby
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Yuhchang Hwang: Arizona State University
Alison J. Kirby: Boston University

Review of Accounting Studies, 2000, vol. 5, issue 1, No 3, 57-85

Abstract: Abstract We investigate the welfare consequences of incumbent firms' mutual disclosure of cost information when there is a threat of entry from a firm not required to disclose its private cost information. New effects of disclosure are observed relative to no-entry models, with the result that incumbents' expected output is a decreasing function of the disclosure level. However, further analysis shows that increased disclosure usually increases incumbent expected profits and decreases expected consumer surplus, despite the additional entry effect of disclosure. Such analytical derivations provide objective input to the FASB as they attempt to predict the competitive effects of changing mandated disclosure requirements.

Keywords: Disclosure; competitive effects; entry; oligopoly (search for similar items in EconPapers)
Date: 2000
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DOI: 10.1023/A:1009664918749

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