Producing to Signal: Private Information in Dynamic Quantity Competition

Andrew Sweeting, Xuezhen Tao and Qian Wang

No 22093, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We model a finite-horizon game of repeated oligopoly competition in which sellers choose quantities of a homogeneous product with linear demand and have private information about their own marginal costs, which are serially correlated over time. Focusing on fully separating equilibria, we provide conditions for existence and uniqueness. Relative to static complete and incomplete-information benchmarks, sellers’ incentives to signal low costs can substantially affect output, productive efficiency, and welfare, even when there are ten or more sellers. We apply the model to the global oil market, and compare predictions to a model where sellers can make quantity commitments.

Keywords: Dynamic signaling; separating equilibria; oil markets (search for similar items in EconPapers)
JEL-codes: C73 D82 L13 L71 (search for similar items in EconPapers)
Date: 2026-10
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