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To spy or not to (fire the) spy: The benefits of acquiring information about rivals¡¯ play in Bertrand competition

Cuihong Fan (), Byoung Heon Jun () and Elmar Wolfstetter
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Cuihong Fan: Shanghai University of Finance and Economics
Byoung Heon Jun: Korea University, Seoul

No 1609, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: The present paper explores the impact of planting a spy in a competing firm who discloses operational information about pricing in a Bertrand market game with differentiated products under incomplete information. The results depend upon whether the presence of the spy is common knowledge and whether the identity of the spy has been disclosed. Altogether, spying may benefit both the spying and the spied at firm. Although the spied at firm would prefer not to be spied at if its cost is low, firing the spy, which is an option if the spy¡¯s identity has been disclosed, adversely affects beliefs and is never profitable.

Keywords: Industrial espionage; price leadership; collusion; antitrust policy; incomplete information (search for similar items in EconPapers)
JEL-codes: D43 D82 L41 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-com and nep-ind
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