Should Capital-Intensive Firms Share Demand Information with Their Competitors?

Pedro M. Gardete
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Pedro M. Gardete: Stanford University

Research Papers from Stanford University, Graduate School of Business

Abstract: This paper proposes a model of competition under asymmetric information to investigate whether firms have an incentive to share demand information with their competitors. The question naturally arises because the result that better information benefits a single-agent does not generalize to multi-agent settings. The paper also proposes parametric identification and estimation methods for a broad class of games of asymmetric information. Data from the Dynamic Random-Access Memory (DRAM) industry is used to determine the parameter region of study. I find that firms may indeed benefit from sharing demand information with their competitors, in contrast with the results established by the standard linear-normal models. Moreover, capacity constraints may induce asymmetric effects of information on different competitors. Finally, downstream firms and consumers also benefit from information sharing due to higher coordination between the market needs and the industry output.

Date: 2014-07
New Economics Papers: this item is included in nep-com, nep-cse and nep-mfd
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