EconPapers    
Economics at your fingertips  
 

Information and Market Power

Dirk Bergemann (), Tibor Heumann and Stephen Morris

No 13295, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We consider demand function competition with a finite number of agents and private information. We analyze how the structure of the private information shapes the market power of each agent and the price volatility. We show that any degree of market power can arise in the unique equilibrium under an information structure that is arbitrarily close to complete information. In particular, regardless of the number of agents and the correlation of payoff shocks, market power may be arbitrarily close to zero (so we obtain the competitive outcome) or arbitrarily large (so there is no trade in equilibrium). By contrast, price volatility is always less than the variance of the aggregate shock across agents across all information structures, hence we can provide sharp and robust bounds on some but not all equilibrium statistics. We then compare demand function competition with a different uniform price trading mechanism, namely Cournot competition. Interestingly, in Cournot competition, the market power is uniquely determined while the price volatility cannot be bounded by the variance of the aggregate shock.

JEL-codes: C72 C73 D43 D83 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-des, nep-gth, nep-ind and nep-mic
Date: 2018-11
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=13295 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Information and Market Power (2017) Downloads
Working Paper: Information and Market Power (2015) Downloads
Working Paper: Information and Market Power (2015) Downloads
Working Paper: Information and Market Power (2015) Downloads
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:cpr:ceprdp:13295

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=13295

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2019-03-31
Handle: RePEc:cpr:ceprdp:13295